The International Monetary Fund in its latest Economic Outlook report has projected an impressive growth for Kenya in 2016, but it has also issued a red alert about the country’s fiscal deficit.
The Jubilee government has undertaken numerous ambitious infrastructural projects, including the construction of the Sh327 billion Standard Gauge Railway, that has seen expenditure exceed the country’s revenues.
The IMF says these mega projects that include highways, power plants, sea ports and airports are not necessarily bad.
In fact, these will see the country’s Gross Domestic Product (GDP) jump to a high of 6.8 per cent, a 0.3 per cent rise from last year.
Surely, this is encouraging given that most African economies have chugged along after the collapse of commodity prices.
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This is especially crucial now as the country ushers in a politically charged season that culminates in elections in August 2017.
Previously, depressed economic activity has characterised this season.
But the huge outlay in projects could also be our undoing. The IMF cautions that the fiscal deficit will “remain particularly large, and above 7 per cent” on the back of large investment projects and that “large fiscal deficits create additional vulnerabilities”.
And therein lies the rub. True, Kenya’s debt is far from the scary levels of the likes of Ghana but it is slowly careening off to the red corner.
We are certainly living beyond our means, and every dollar that is borrowed either locally or internationally, adds to the debt mountain.
There is nothing wrong with borrowing. But what makes heavy borrowing scary is that sometimes, the borrowed monies are hardly accounted for.
Indeed, there is no country in the world that can earn the bragging rights of being debt-free.
But then, debts should be incurred sustainably.
