Commentaries

KENYAS NATIONAL DEBT

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Published on Wednesday, 06 June 2007 02:33

Up until 1982 Kenya boasted one of the highest GDP growths among the third world countries. In the 70s Kenya's growth rate was closely on the heels of Israel and China, Which are now bona fide economic forces to reckon with. Where the heck did things go wrong? Why didn't someone put the lid back to stop the economic hemorrhage that has now reached it's advanced stages?
Israel and China are countries that have greatly benefited from the World Bank, and the I.M.F. The said countries have always worked on perfecting a good relationship with their lenders. It's a simple requirement; Invest wisely, make your investment productive, make payments on the loan and as the cycle continues ask for bigger loans.
It all boils down to vision, hard work, responsibility and accountability.
To simplify the matter, Kenya ruined its credit along time ago and has since done little to repair its credit with the international lenders. The Government has been particularly stubborn, even accused the lenders of being intrusive and colonial. Equate it with throwing tantrums at your local car dealer upon disapproval for financing, on reasons that pertain to a previous repossession or unpaid credit card debts.
The bottom line is, you are at fault and the blunder is of your own making. Throwing feats will not get you a car, but if you seek advice from a credit repair agency and adhere to their recommendations, you will be right on the road to getting yourself behind a financed wheel, sooner.
Whether it was sheer stupidity or lack of economic vision is not certain. But believing Kenya can make it without international lenders money, is the most unrealistic thought to ever cross the minds of the current Government.
There is no way domestic borrowing from local banking institutions could have replaced World Bank and the International Monetary Fund. The Kenyan Government has had to learn this truth the hard way. It was a bad decision that has dealt a heavy blow on the economy.
Now, Kenya is stuck with a public debt of $ 7.5 billion and a good part of this debt is from the domestic market, which charges exorbitant rates compared to the rates charged by International lenders. Kenya uses more than fifteen percent of its budget in paying its loans. The interests are accruing and sooner than later; Kenya will farther cut down development and retrench more civil servants to meet a budget that will require more money to go into the escalating public debt.
Kenyan bank loans now go for a whooping thirty-nine percent in interests charge. The high rates are in most part a result of the Government crowding the capital market, a tendency that not only drives interest rates to the ceiling but also chokes economic growth.
Prospective developers and investors are being denied substantial loans that would have in due course translated into the creation of more jobs because, the Government with its preeminent position has elbowed them to the side and pushed them farther by orchestrating the enactment of discouraging interest rates. The scenario is synonymous to a wealthy sibling capable of buying hundreds of acres but still feuding his less fortunate siblings over a ten-acre family lot.
More than anything the Government needs to enforce the recommendation imposed by the international monetary fund and the Word Bank. The nation can no longer afford to sacrifice long-term economic health for short-term political advantage. We have hit the economic bedrock and the experience hasn't been pleasant. The Government ought to be eager to do whatever it takes to receive the much-needed financial aid to mark the first leg in resuscitating the economy.