Immediately after the ill fated Jubilee regime came into office in April 2013, they embarked on a process of burdening the country with unsustainable borrowing. This started with the rebasing of the GDP. The base calculation year was changed from 2001 to 2009. This added 25% to the GDP.
This meant a number of important things:
1. Kenya moved from a low income country to a low middle income country as per World Bank classification. This meant the country was less eligible for cheap concessional borrowing from multilateral bodies such as IMF/World Bank. Consequently, the country started picking up very expensive commercial foreign debt.
When Jubilee took over we only owed KShs 57.46 billion in expensive external commercial debt. As of November 2017 we owed KShs 707.88 Billion a growth of 1,132%. This will be made worse by the recently issued KShs 203 Eurobond. The expensive external debt increases our interest payment burden and exposes us to forex risks as the debt is mainly dollar denominated.
2. The rebasing of the GDP lowered our debt to GDP ratio giving the government higher capacity to take up more debt. This has been abused a lot.
3. Borrowing from commercial banks means no questions asked. Borrowing from IMF and World Bank came with lots of questions, conditions and follow ups on the use of the money and the state of the economy. Borrowing from commercial vultures has no conditions attached to it. They are like a bar owner who keeps filling your glass for as long as you can pay.
We are now into what is called “Eurobondage” i.e. slaves of the international debt markets. We must do something before it is too late.
By Ephraim Njega