This archive report was first published on 24 October 2019.
Published on October 24, 2019, the harsh reality of Kenya's debt crisis is beginning to hit home. The government has suspended construction of a major road project linking Mombasa and Nairobi due to costs that are simply unbearable.
The estimated cost of the project is Sh300 billion, a staggering amount that is close to the Sh320 billion spent on the standard gauge railway (SGR) two years ago. The SGR, a flagship project of the current administration, has been a loss-making enterprise, with China, the initial financier, holding back on funding the second phase due to concerns over Kenya's debt risk.
Kenya's debt portfolio stands at Sh6 trillion, twice the national budget and 52.2 per cent of GDP. The country's debt regime creates a vicious cycle of poverty, where taxes collected are prioritized for debt repayment, leaving little for recurrent and capital development. This has led to a debt treadmill, where the country struggles to service its debt.
Parliament recently raised the debt cap to Sh9 trillion, opening the floodgates for borrowing. However, the costs of infrastructure development are hugely inflated, with a large chunk of funds used to bribe officials and their cronies. The projects are often done shoddily due to poor inspection, and it is the taxpayer who ultimately loses out, paying back loans used for poorly done projects that only benefit bigwigs in government.
The government should cut down on reckless expenditure and prioritize sustainable development. It is time to stop the borrowing spree and focus on projects that give returns and are self-sustaining.
