President Uhuru Kenyatta with Chinese President Xi Jinping in Beijing
Several political leaders in this country have voiced their concern over State borrowing. Some have condemned the government over the issue. They want Kenya to borrow less. The official line is that there is room (and need) to borrow more.
Some leaders have even claimed that Kenya is the No.1 borrower in Africa. That obviously is not the case, but convincing the public after such careless utterances by leaders is an onerous task. If that is the aim of the said leaders, then the perception will thrive even though damaging and faulty both in substance and merit. Here are some facts to consider as the debate rages.
Nairobi City Skyline
For starters, Kenya is at number 13 in Africa and number 70 in the world at 52.80% of GDP. In Africa, Cape Verde stands at 123%, Egypt at 90%, Sudan at 79%, Zimbabwe at 77%, San Tome & Principe at 68%, Ghana at 67%, Mauritania at 67%, Morocco at 64%, Mauritius at 61.60%, Seychelles at 60%, Mozambique at 55.40%, Djibouti at 55.20%, Kenya 52.80%, Gambia 50.70%, South Africa 50.10%, Tunisia 47.50%, Lesotho 45.80%, Senegal 44.20%, CAR 41.83%, Tanzania 39.90%, Sierra Leone 37.65%, Angola 36.50%, Ivory Coast 36.41%, Niger 36.40%, Madagascar 34.90%, Uganda 34.70%, and so on.
Tokyo Bay Aqualine Tunnel
Apparently some of the biggest borrowers are also some of the most developed and biggest bilateral lenders, as witness the following list: Japan 229.20%, USA 104.17%, Canada 91.50%, Euro Area 90.70%, Greece 176.90%, Italy 132.70%, Belgium 106.00%, Singapore 104.70%, Spain 99.20%, France 96.10%, Ireland 93.80%, UK 89.20%, Jordan 89.00%, Germany 71.20%, India 67.20%, Brazil 66.23%, Netherlands 65.10%, Israel 64.80%, Pakistan 64.80%, Malaysia 54%, China 43.90%, Russia 17.70%.
United Kingdom Road Network
It is clear from the above list that there is a relationship between borrowing and development. The West understands that very well. Japan is lending to the whole African continent. Their borrowing in relation to the GDP stands at a staggering 299%. And those who have been to Japan will tell you how superbly developed the country is. The figures above are clear evidence, if one is needed, that to grow and modernize a country has to borrow.
Kuala Lumpur Malaysia
The few countries in Africa which have borrowed much less than Kenya fall into two general categories: those developing at a much slower pace and those that have mineral wealth which supplied the necessary funds for development. Gabon 34.10%, Namibia 34%, Republic of Congo 34%, Guinea Bissau 32.20%, Zambia 31%, Guinea 29.50%, Ethiopia 28.60%, Burkina Faso 28.30%, Rwanda 28%, Botswana 22.70%, Malawi 18%, Burundi 15.20%, Nigeria 11.50%. Algeria 8.76%, Equatorial Guinea 6.40%, Libya 6.10%.
Standard Gauge Railway under construction.
Critics of the government borrowing policies overestimate Kenya’s dependence on foreign investors while underestimating the foreigners’ need to invest. An example is China which clearly needs a strong Africa for economic reasons just as it needs the US and Europe for trade reasons. China depends on US consumers to purchase its products. The latter consumes Chinese imports equivalent to what the whole of Europe consumes. That makes China dependent on those economies. They want to improve African consumption of their products and the only viable way is to empower African economies. I do not think that is necessarily a bad thing.
Nairobi by Night
It is unwise in my view, to blame government for not creating jobs while at the same time denigrating it for borrowing too much. We have to define what ‘too much’ means bearing in mind our thirst for development. A decline in economic activities cannot be remedied by reducing borrowing for infrastructural improvements. To reduce pressure on government resources to pay off debt can only be solved by empowering the tax payers and improving their capacity to pay more to the tax agency. That is what the Roads, Railways and Airports upgrading will do to the tax payer. Instead of freezing employment it will create jobs and improve incomes. The more developed a country is, the more they are able to borrow at better terms. Japan seems to be borrowing at very low rates of interest for on-ward lending at much higher rates of interest to poorer countries, including Kenya and most of Africa.
I believe our main emphasis should be on monitoring the expenditures by the state, state institutions and agencies, counties, and the independent contractors and suppliers; and highlighting discrepancies where they exist and condemning proven graft. And finally, legislating in detail to curb spillage and empowering agencies that handle investigations.
President Uhuru Kenyatta inspects a section of the SGR.
If the figures above are faulty, please check with Tradingeconomics.com, my source.