EDITORIAL: Borrowing a big worry

 

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Summary

• The Treasury must find more innovative ways of managing its resources, including considering slowing down on borrowing to stop the worrying trend of borrowing from Peter to pay Paul.
• This comes against the backdrop of reports that the Treasury has borrowed Sh125 billion from various lenders so as to pay off debts that are falling due in the near future.

The Treasury must find more innovative ways of managing its resources, including considering slowing down on borrowing to stop the worrying trend of borrowing from Peter to pay Paul. This comes against the backdrop of reports that the Treasury has borrowed Sh125 billion from various lenders so as to pay off debts that are falling due in the near future.

There has been a considerable debate about Kenya’s borrowing trends since 2013 and although there are those who think that the debt to GDP ratio is healthy, critics are worried that Kenya is borrowing too much too fast, exposing the country to increasing risk of defaulting.

Already, slightly over half of tax collection is being spent on repaying loans, which is way too high for a country with a high wage bill and not sufficient spending on development.

This means that the government must be innovative in the way it borrows and spends to ensure that in the long-term, the bigger chunk of the national income is not spent on servicing debts.

Too bad, the writing is already on the wall. And one way of ensuring that the country does not continue digging itself into a deeper debt hole, is to stop borrowing to pay off debt.