The Kenyan National Treasury has revised the country’s budget upwards by 126.3billion shillings with a bailout for Kenya Airways, COVID 19 plant and fuel subsidies being key drivers for this rise. The airline was initially set to receive 53.5 billion shillings but instead will receive 26 billion more. Fuel subsidies will take another 24 billion shillings whilst the proposed COVID vaccine factory will cost 8.5 billion shillings and the general elections in August to cost 9 billion shillings. All of these have widened the deficit in Kenya’s budget to 8.2% from 7.5% and poses for the government another round of borrowing. Business Edge’s Lekan Onabanjo is joined by Aly Khan Satchu, Africa geo-economist and macro-analyst to discuss the rising debt in Kenya and its ballooning budget deficit
Satchu disagrees with this move and says considering the volatility in oil prices that’s seeing it head to $100 for example, it doesn’t solve any problem. “It’s not a sustainable policy”, he says. “I think it speaks to the little awareness to the pressure of living faced by the average citizen. But this is a typical knee-jerk reaction and it’s highly unsustainable.
It might be unsustainable according to Aly Khan Satchu who is also CEO of Rich Management, a Nairobi based investment advisory firm. But to the outgoing Uhuru Kenyatta government, it is the only way to put a cap on its legacy of embarking on mammoth infrastructure projects. Kenya’s total debt now stands at 7.2 trillion shillings (approximately 62 billion dollars). “The government has always been borrowing heavily… to fund these investments which are simply not paying off. The government has overspent and these [subsidies] are only palliatives. The subsidies are short-term measures, political reactions that make very little economic sense.”
The government certainly doesn’t think this is a problem as it goes ahead to push for Parliament to approve the supplementary sent to it.
You can see the full discourse between Lekan Onabanjo and Aly Khan Satchu on Business Edge above.