Get a solid plan to prop the economy

As we all know, total debt service to revenue is a key debt affordability metrics. You will see from the statistics that are published by the National Treasury monthly that total debt service deteriorated to a record 78.3 per cent in the month of November 2024- a figure nearly twice the level in the previous month.

I don’t want to cram this articles with dry statistics. But when you calculate and look closely at other key parameters- such us the primary budget balance and overall budget balance, the inescapable conclusion you will reach is that the government is struggling financially.

I called up the Director of Economic Affairs, Mr Albert Mwenda the other day to comment on the worrisome trends reflected in the November budget outcome numbers. As expected, he put up a brave face, arguing that my pessimistic attitude was as a result of reading of the November outcome numbers without recognising monthly fluctuations in revenues.

Mwenda argued that the shilling recently strengthening against the US dollar and with domestic interest rates having dropped significantly by over six percent, debt service cost numbers were bound to come down in the New Year.

Read:  The good, the bad and the ugly of Ruto’s economic policies

He made the point that Parliament had only recently passed additional revenue measures and that the outcome will only be assessed in the beginning of the year.

Mwenda and I have been pals for a long time. His response reflected optimism of the will and in the belief that economic planning is the art of the possible. The National Treasury has only been surviving by permanently engaging in fiscal juggling.

You borrow to finance deficit, borrow to finance your recurrent budget, borrow to finance each month’s interest on public debt and borrow to make giant make monthly principle debt repayments. We are stuck on a debt tread mill, permanently borrowing from Peter to pay Paul.

I wonder, what will the situation look like when the large maturities come knocking in the early part of the New Year.

Sustainable solution

I think that the biggest challenge for the President William Ruto administration in the New Year will be how to come up with a sustainable solution for bringing down cost of debt service to revenue. Economic policy making is a not just about a set of figures on a spread sheet.

The fiscal juggling which the policy elite have been engaged in has been happening at the expense of focus on the material economy.
We want to hear new and fresh ideas on tangible measure to give fresh impetus to agriculture and to the manufacturing sector.

What happened to that very transformational idea of importing natural gas from Tanzania and force all those expensive generators operating on the coast region to convert to cheap gas? AS we all know, Kenya fuel power plants are mandated by law to convert from oil fuel to natural gas as soon as it is available.

Today, the total installed capacity in those power plants in Kipevu and Rabai amount to 430 MW. Yet when you listen to the policy elite in this space speak today, the impression you get is that this transformational change is no longer a priority issue for them. We need to save the electricity consumer from the tyranny of these expensive generators.

What happened to the road annuity programme? What happened to revival of Galana Kulalu? Isn’t this the year the year for the administration of President William Ruto to negotiate and close a major PPP road project. What happened to the plan to concession Lamu Port? The plan to extend the SGR to Malaba should be moved beyond rhetoric.

The Tourism sector in Kenya has over the years evolved into a complex sector with tentacles in other sectors. This is the year for the administration to roll out a marshal plan.

When it is at a laoe point, the ramifications are felt in many sectors, including agriculture fishing food processing and in the manufacturing of garments and handicraft. If action is not taken, brace for a wave of insolvencies in the hospitality sector.

The writer is the former managing editor at The EastAfrican