Transparency key in management of national debt
By Irene Boke
Kenya has used loans to finance a number of projects that could have otherwise taken too long to implement using our own revenue.
Where debts are used appropriately, the result is growth and prosperity of a country and improvement of living standards.
But when governments borrow more than they can sustain, and worse, when the money is used on frivolous projects, it becomes a burden to the taxpayer.
Kenya’s national debt is rising at an alarming rate. The debt currently stands at Sh6.3 trillion and for every Sh100 of tax paid, more than half of it goes to servicing the debt.
That means we will be unable to effectively execute our budget. Kenya’s debt to GDP ratio stands at 64 per cent.
Kenyans must hold duty-bearers accountable for money borrowed. There is need for Kenyans to know the projects being funded, the financing source and the amount being borrowed.
This information should be publicly available for accountability purposes.
Article 35 of the Constitution requires the State to publish any important information affecting the nation.
I believe issues to do with acquisition, use and repayment of public debt is among the information foreseen under this Article.
Article 211 further requires the Cabinet Secretary for Finance to present to Parliament upon request, information on loan guarantee stating the total loan, the use, repayment provisions and progress made in repayment.
The Public Debt Management Office also has the mandate to maintain a debt database for all loans taken and guaranteed by the government, monitoring, keeping track of debt levels and preparing and publishing debt statistical bulletins regularly.
The National Treasury recently validated the first ever debt policy and borrowing framework which sets out, among other things, transparency and accountability including transparency in selecting financing source.
In the words of World Bank President David Malpass, “in order to grow faster, many developing countries need more investment that meets their development goals.”
This should, however, not be at the expense of a country’s ethics and economy especially in financing development.
In order to effectively advance development projects, and for a country to be able to settle its debts without unnecessarily burdening its citizens, there is need for debt transparency clearly stating the amount to be borrowed, the project the loan is meant to finance and the terms and conditions for borrowing.
Debt transparency is important as timely, comprehensive and readily available data on the level and composition of debt are a crucial not only for the effective management of public liabilities but also for identifying and minimising the impact.
Availability of such information also contributes to formulation of critical policies, strategies and decisions that improve financial stability and good governance in Kenya and enables the citizens to hold the government accountable for prudent public debt management.
Despite having the law providing for transparency in public debt, and calls from development partners, including IMF emphasising the importance of transparency in public debt, the mandated bodies have not fully executed their mandate.
The Public Debt Management Office should, therefore, perform its mandate in updating and publishing information on national debt so that citizens can hold their leaders accountable.