Horror of Sh12 trillion public debt with little to show

Kenya’s growing debt that has crossed the Sh12 trillion mark under President William Ruto’s administration has raised eyebrows among his critics, with economists noting the lack of tangible projects to back the increased borrowing.

Amid increased taxes that were supposedly meant to offset debts, by the end of the 2025/26 budget cycle, President Ruto’s administration would have borrowed Sh3.4 trillion to fill budget deficits.

This is besides introducing other debts off the government’s balance sheet such as the securitisation of the Road Maintenance Levy and the Sh45 billion bond for Talanta Stadium amid the ballooning pending bills that now stand at Sh524.8 billion.

Ndindi Nyoro, the former Budget and Appropriation Committee chair in the National Assembly — turned a fierce critic of his party leader — has claimed that the government has borrowed Sh3.5 trillion in the last three years, which translates to Sh3.3 billion a day.

His sentiments hold weight from the view of economists who spoke to The Standard detailing how despite President Ruto’s administration collecting more revenue than his predecessors — crossing the Sh2.5 trillion mark in the just ended financial year — there is almost no tangible project connected to this increased revenue collection or borrowing.

Patrick Muinde, an economist, refers to the promise made by the President when he was campaigning that he will check government borrowing as a political gimmick.

He says the report by the Controller of Budget has shown how extravagant the government is, especially within the presidency.

He adds that borrowed money, as per the Constitution, should go to projects. However, these amounts are being consumed with no value into the economy.

A report by Controller of Budget Margaret Nyakang’o on 2024/25 expenditure shows State House used close to Sh4 billion in less than two months on meetings and travel against the Sh2.3 billion approved.

“The use of taxes or increases of taxes in the name of debt was simply a political gimmick. The government has not lived to that. They told us we choose either to borrow or pay more taxes. We have paid more taxes but the borrowing is more,” Muinde says.

He adds that the argument for high taxes was so that the country goes easy on loans.

“What we have seen, as per the trend in the last three years, of course the Ruto government has collected more than the previous administrations, but it has also borrowed more,” he told The Standard in an interview.

“That speaks to what many of us have been arguing that the problem with this government is not that of income but spending.”

Muinde cited the 2025/26 budget where development has been allocated Sh721 billion yet the plan is to borrow close to Sh1 trillion.

“That implies that part of what we borrow will go to consumption. And if what is borrowed goes to consumption, it will have no impact in the economy,” he says.

“When projects stall, we borrow; no new projects, we borrow.”

Ndindi, who is the Kiharu MP, while speaking at an event in Nyeri County, pointed out that Kenya has always had development for many years without heavy borrowing.

“President Kibaki did a lot of development, he borrowed only Sh1.2 trillion for 10 years. Where is the Sh1.2 trillion we are borrowing every year going?” he posed.

Ndindi said even the tangible projects being seen by Kenyans are not being financed by collected revenue.

“It is another loan on the side called fuel levy securitisation,” he said.

He cited the Kenol-Marua Road, Talanta Stadium and Mau Summit-Rironi Road.

“Everything you see in Kenya in terms of development, like the Talanta Stadium, is also not part of the Sh12 trillion debt,” he added.

He said it is a habit that every time an administration nears election period debt appetite increases due to panic of undelivered promises.

“That means that every time we are nearing elections, we start having fiscal expansion, because there is nothing much to be seen for the last past year, in basically one year.

‘‘We want everything to be seen, what do we do, we become reckless in borrowing. Kenya is there now,” he said.

Ken Gichinga, Chief Economist Mentoria Economics told The Standard that ideally, if you are borrowing for development, the cost of doing business should come down.

“If it is a road, the cost of transport should come down, get more businesses thriving and hiring more people. That tends to be the development economic model. But what we are seeing right now is very weak demand,” he said..

Gichinga said the narrative government advisors have put forward to defend the borrowing is that there were heavy debt maturities that necessitated this level of credit.

“But most Kenyans would want to see tangible projects that are tied to these borrowing. That is what is creating the discontentment,” he said.

At the end of June 2022, the stock of public debt stood at Sh8.6 trillion. This figure has grown by 3.5 trillion to the current Sh12.1 trillion.

During his campaign, while still the Deputy President in the Jubilee administration, President Ruto vowed not to sink the country deeper into debts detailing how he will streamline the business environment and tax regime to collect more revenue even referencing former President Kibaki way of doing things.

“I have told you what Kibaki did. You do not need rocket science. You need to allow enterprises to thrive, get police out of managing the economy, get more people with jobs so they can pay taxes, and create more enterprises at local level,” he said during an interview with a local media.

“You need to get the tax regime right, fair, balanced and equitable.

‘‘I have given you a plan on how to raise an extra Sh600 billion.”

At a church function months after taking office, he referenced his campaign promise.

“We cannot continue to get the short cut route to money from debt when we can actually raise (money) from our revenue,” he said.

During the recent ODM-Kenya Kwanza Parliamentary Group meeting, the same script was staged as he warned that debt has the potential to threaten development.

He said it is the reason National Treasury Cabinet Secretary John Mbadi and himself have done what they could to contain ballooning of the debt, citing the securitisation model and public private partnerships (PPPs) for projects such as the extension of the railway from Naivasha to Malaba and works on the Mau Summit-Rironi Road.

“We have gone out of our way to look for alternative sources of funding so that we don’t always have to borrow,” he said.