Kenya’s hope of borrowing up to Sh347 billion to finance the 2020/21 budget suffered a setback last week following the downgrade of its creditworthiness from B+ to B- outlook by Fitch Ratings’.
This followed Moody’s move that saw the firm drop Kenya’s rating from stable to negative last month.
Apart from making it difficult for the country to get commercial loans from the global financial markets, this development raises the cost of such loans and makes it unwise for a struggling economy like Kenya’s to borrow.
However, it gives Treasury Cabinet Secretary Ukur Yatani an opportunity to turn the dark cloud on the economy by taking four house-cleaning steps.
First, the CS can lead the country in swallowing its pride and accepting the Group of 20 industrialised countries’ offer to freeze the repayment of debts following the global outbreak of the coronavirus epidemic.
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This would reduce the burden the country faces in attempting to put together Sh904 billion required to repay the loans in the upcoming 2020/2021 financial year.
This would be a logical step because the country had spurned the offer earlier, fearing that it would lead to the downgrading of its credit rating. This has come to pass.
Prohibitive terms
Earlier estimates had put the amount to be saved at Sh71 billion, but that was before China agreed to join the G-20 and freeze the repayment of its debt, too.
Second, President Uhuru Kenyatta could lend the Treasury CS the political support he needs in compelling all ministries, departments and agencies (MDAs) to first utilise the Sh1.1 trillion already given to the country in concession loans and grants before expecting new money in the coming financial year.
This would reduce pressure on Treasury to go out and borrow fresh loans at a time when the terms would be prohibitive.
Three, the CS may consider increasing pressure on the office of the Director-General of debt management headed by Haron Sirima to restructure and reschedule current loans to give the country some breathing space as it re-organises its economy.
The focus should be on the largest and the more ruthless lenders who demand their pound of flesh irrespective of what the country is going through. The hope is that the country would learn a lesson or two and keep off such predatory lenders.
Four, Treasury should speed up the establishment of its proposed bank that would assist Kenyans to set up industries in areas that offer the highest return on investment.
Mbatau wa Ngai; nmbatau@gmail.com
