Let the candidates explain their public debt plans during debate – Business Daily
The presidential debate will be happening today (Tuesday), and Kenyans are anticipating a rigorous discussion around the problems they are facing. One of the main subjects I expect to feature is Kenya’s public debt problem.
The Azimio candidate, Raila Odinga, has said that he plans to restructure debt to ease the debt servicing cost Kenyans are shouldering. His Kenya Kwanza rival William Ruto has said that he doesn’t intend to restructure debt but increase the tax base.
The positions taken by both camps on debt are simplistic rhetoric about a more intricate problem. Now, the starting point of the conversation should be about verifying the size of the public debt. When talking about public debt, it is always a shot in the dark because we have no idea what the true size of our public debt is.
The Treasury has blocked all efforts for the full disclosure of Kenya’s debt register. Even the Public Debt Management office mandated to manage the register has found itself thrown at the periphery. So, the first commitment presidential candidates ought to make to Kenyans is full disclosure of Kenya’s public debt.
This then should be followed by an audit of all the debt portfolios in the register and then the transfer of the register to the Office of the Public Debt Management which is mandated to manage the register. It is my hope that the moderators will be able to secure this commitment from the presidential candidates.
On the proposals, lets starts with the Kenya Kwanza plan. It is simplistic because Kenya’s debt sustainability problem is in high debt servicing cost. In the financial year 2021/2022, Kenya’s debt servicing cost was Sh1.15 trillion, which was 58 percent of revenue collection.
This cost will even be increasing this financial year when it is expected to be Sh.1.35 trillion — 60 percent of revenue — by June 2023. If 60 percent of total revenue goes to servicing debt alone, that means government is operating on too slim a budget to meet much of its obligations.
Now, for a government that has only 40 percent of its revenue to deploy against an anaemic economy and achieve robust economic growth targeting revenue collection of Sh.2.75 trillion by 2024 is highly unlikely and unconvincing.
Azimio’s pronouncement that they will restructure debt is also simplistic. What exactly do they mean when they talk of “public debt restructuring?”
Debt restructuring gives the impression that they will be looking at comprehensive restructuring and this created market jitters among investors holding Kenya’s Eurobonds during the manifesto launch. It’s close to impossible to do a comprehensive debt restructuring.
When it comes to concessional loans, they have the most favourable terms already and debt relief is what governmet can ask for. If it is about restructuring foreign commercial debt, which are the Eurobonds and syndicated loans, that is a no-go zone because it will be received as a default and the consequences that follow are dire.
Kenya will be locked out of the international credit market and financing much of government obligations will be impossible.