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Kenya

Running out of public credit

As the Jubilee government plans a referendum on another costly bout of devolution, citizens protest against rising debt

Arguments over public debt and fiscal balance have left the cabinet rooms and think tanks for the streets. At home and in public meeting places, Kenyans are airing concerns that government borrowing is out of control.

Several petitions, signed by thousands, urge the International Monetary Fund to reconsider its decision this month to lend President Uhuru Kenyatta's government $2.34 billion in a three-year financing package (AC Vol 62 No 4, Politics of largesse).

The IMF conditions for the loan include reducing the size of the civil service to cut high wage bills, although ministers are likely to try to avoid job cuts, and a programme of privatisation and restructuring of state corporations.

The funding programme includes a commitment to fight corruption and broaden the tax base. Yet confidence in the government's anti-graft campaign is close to zero.

Tax reform is urgently needed. Government is reluctant to focus on corporate tax evasion, property levies and compliance measures in general. Instead, it is likely to raise fuel duty and income tax, both of which disproportionately hit the poor and the lower middle class. Most of the elite can circumvent income tax while holding out against taxes on their land and property.

'Previous loans to the Kenya government have not been prudently utilised and have often resulted in mega-corruption scandals,' reads a petition circulating online and on social media.

Public debt is rising towards 70% of GDP. Grand new infrastructure projects and hefty budget deficits in the wake of the Covid-19 pandemic mean still higher debt levels in the coming years (AC Vol 61 No 20, A DIY debt trap). Before the pandemic struck, Kenya was spending 40% of its tax revenue on debt repayment.

Public opposition will not stop the latest IMF loan. But it is a clear message ahead of elections next August: voters are watching ever more closely how politicians spend public funds.



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