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Debt crisis hinders Kenya’s new infrastructure dream

Kenya Government debt accounted for 66.9 % of the country's Nominal GDP in Sep 2022, compared with the ratio of 67.3 % in the previous quarter. Kenya National Government Debt reached 72.1 USD bn in Sep 2022, compared with 72.2 USD bn in the previous month.

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By Staff Writer

Kenya’s Ministry of Transport and Infrastructure will cease bankrolling new infrastructure projects until the Sh910 billion debt owed to contractors and suppliers is settled.

Cabinet Secretary Kipchumba Murkomen while revealing the state of affairs on his docket, further revealed that the ministry was in need of another Sh600 billion every year to settle pending bills alone, saying the accrued debt was accumulated in the previous regime – and must be remunerated before new projects are commenced.

Read: Kenya sets aside Sh172-4billion-budget-for-its-infrastructure/

“You will be seeing the government bringing the contractors back, some of them have been auctioned because they are unable to pay their debts and the government will revive their businesses,” said Murkomen in Nakuru last weekend.

He, however, expressed confidence that an agreement was in the offing and whose execution will see his Ministry strike a deal with the National Treasury to receive the Cabinet’s backing of Sh1 trillion if all the pending projects initiated during the Jubilee administration are to be completed.

Former President Uhuru Kenyatta’s administration implemented key infrastructural projects with the intention of transforming the face of Kenya’s terrain, as well as easing accessibility, but it came at a cost – gobbling up hundreds of billions of shillings most of which is believed to have benefitted a few individuals through kickbacks and bribes.

Read: https://www.financialfortunemedia.com/pension-funds-urged-to-invest-in-infrastructure-projects/

Some of the key projects done under the Kenyatta era include the magnificent Expressway, which cost the taxpayers a staggering Sh87. 9 billion, from the Sh65. 2 billion initial budget estimate provided by the Kenya National Highways Authority (Kenha).

The 27 km elevated highway stands out as one of the most prominent projects undertaken during the previous regime and connects Jomo Kenyatta International Airport (JKIA) to the Westlands area. Launched, initially on a trial basis in May 2022, the highway, according to the government, was put up to ease congestion and beat traffic along the busy Mombasa Road.

The highway was to be fully financed by the China Communications Construction Company (CCCC), the parent firm of China Road and Bridge Corporation (CRBC), a loan facility.

The Lamu Port commenced operations in 2021, a moment termed a milestone for the East African region, cost the government an estimated Sh2.5 trillion to construct – designed to serve as an alternative to the Mombasa Port which serves the extensive region of Kenya, Uganda, South Sudan and DRC.

The project is part of the Lamu Port South Sudan Ethiopia Transport corridor project, LAPPSET, conceived during the reign of the late president Mwai Kibaki. It connects northern Kenya to the middle belt of Africa.

With a depth of 18 metres compared to 12.5 metres for Mombasa Port, Lamu Port is expected to attract bigger ships and hence, enjoy economies of scale.

Another is the Standard Gauge Railway which is one of the flagship projects of the Jubilee government. The 578.8 km line was launched in 2017 and connects the port of Mombasa to Nairobi, with an extension to Suswa.

The modern railway has reduced travel time between the two cities, to five hours. It has also opened the region for business, with Mombasa being a strategic entry and exit point for regional neighboring countries.

Out of the Shh327 billion spent on the project, it is estimated that a staggering Sh1 billion was spent on planting grass in certain sections and another Sh1. 4 billion on a chain-link fence – highlighting what has come to be known as a white elephant.

In fact, in an interview with Africa Uncensored in partnership with The Elephant, economist David Ndii ridiculed the project saying “it made no sense.”

“I pronounced myself on this project on the onset even before it was built and said it shouldn’t be built. Because even from the preliminary observation at the time, it did not make either commercial or economic sense to me,” observed Ndii at the time.

It now remains to be seen how the current regime steers around the current economic defies including inflation and the weakening Shilling against world currencies in its quest to raise sufficient funds through taxes in steadying the fiscal ship.

In his first few days in office, President William Ruto rallied calls for enhanced tax collection through the Kenya Revenue Authority (KRA), urging the agency to double its collections from Sh2.1 trillion to over Sh4 trillion – explaining that increasing revenue collection would aid the country in getting out of its debt situation.

But, those calls are yet to bear fruits owing to a cocktail of factors including a high unemployment rate, struggling business environment, expensive credit, and wanton looting in public offices among others which saw tax collection in the first five months of the current financial year fall short of the target by Sh32.2 billion.

The Kenya Revenue Authority (KRA) collected Sh786.5 billion between last July and November in taxes, falling short of the target of Sh818.7 billion that had been set by the Treasury for the period.

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