IMF loan cash must be put to proper use

In Summary

• Public cash must be put into proper use, and the loan from the IMF must be spent on what it was intended for.

By EDITORIAL
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Kenya has received a shot in the arm from the International Monetary Fund with the approval of a
new Sh79 billion credit line to cushion the economy in this trying moment.

The novel coronavirus pandemic has crushed economies across the world and the critical issue now is survival. Any cash injection into the economy will be useful.

A few weeks ago, Treasury Cabinet Secretary Ukur Yatani announced that the government was going to record a Sh172 billion deficit in its budget, arising from tax waivers and other relief rolled out to cushion vulnerable groups from the ravages of the coronavirus.

With productivity falling across the economic sectors due to the restrictions imposed to contain the pandemic, the country is headed for a difficult period.

Aviation, hospitality and long-distance transport sectors are grounded, with most employees out of work. The other sectors are equally affected.

Many organisations are retrenching workers or slashing salaries as they struggle to stay afloat.

More people are being pushed out of productive engagement and consigned to unemployment.

DEBT PILE

The net result is that the pool of vulnerable citizens requiring government intervention is expanding at a time when revenues have fallen drastically.

The resulting scenario is mass helplessness, which threatens social stability and security.

This is why the IMF cash is pivotal for Kenya. However, there are pertinent issues to consider here. Essentially, this is a loan that Kenya must pay back.

Although it has come interest-free because of the prevailing grave conditions, the principal sum has to be repaid within the contractual period.

It adds to the country’s debt pile, which is reaching precipitous levels, given the government’s appetite for borrowing.

The debt burden is more than Sh6 trillion, twice the annual national budget. The challenge with this is that any revenues collected first go to retire loans and that crowds out cash for recurrent and capital expenditure.

Another pertinent issue is the use of the loan. The propensity to steal and misuse public cash is confounding. Billions are lost through corruption and sheer wastage.

Currently, there is public outrage over the spending of some Sh1.3 billion obtained from the World Bank for the Covid-19 campaign.

Prudence and frugality are paramount at this point. Public cash must be put into proper use, and the loan from the IMF must be spent on what it was intended for.