Kenya: Contrary to Popular Belief, Debt Could Make Kenya More Secure

(file photo).
2 January 2020

Kenya raised its debt ceiling to Sh9 trillion just as yields on the Eurobonds it had floated abroad started declining.

Now most Kenyans wonder, 'should we or should we not 'tap' the market again?'

I am no government apologist. I hold no brief in project identification, implementation, pilferage and/or inflation of contract prices.

My view is on debt and it is contrarian. It is the complete antithesis of the popular view in the civil society, academia and within some leading economists' circles.

Consider this: Two people work in downtown Nairobi, each earning Sh20,000. One has never borrowed.

No credit profile; banks do not know him; he survives by meticulously spreading his money throughout the month. The other has been in debt markets since turning 18.

Never defaulted (Kenya was not part of the debt forgiveness for the highly-indebted countries).


Then something terrible happens. Both are confronted by a major 'financial event'. A break-in, bereavement, huge medical bill.... Who between them is more financially 'secure'?

I grew up in Kenya during the 1980s. Every time drought appeared (1984 anyone?), the President would make an international call for help.

Newspapers would flash large aeroplanes landing at JKIA carrying cereals and ships laden with yellow maize that had docked in Mombasa. Before long, yellow ugali would be 'sitting' on one side of my small plate!

Over the past few years, debt, in the minds of Kenyans, has been about railways, roads, dams, (real or imagined) and so on.

Not much has been written about how debt could buttress our food security, peace building, general business environment and predictability in investment.

Yet that is the whole purpose of debt (we borrow to smoothen short-term bumps and pay down debt when times are good).


Developed countries have, for decades, used debt to protect their citizens from the vagaries of life.

Japan is a good example - since 1991, when the cold ice of deflation struck. What confounds most commentators about Japan is how not much has changed!

Life goes on normally in Tokyo and other cities. Were it not for the ageing population beginning to put a strain on social care, everyone is well catered for. (When I went to business school almost 20 years ago, many thought it was just a matter of time before Japan exploded!)

If there is a lesson Kenya needs to learn, it is how to protect ordinary people using debt. To some extent, I can see where the government is coming from. Like China, they want to develop at whatever cost.

Poor Kenyans, on the other hand, are saying, "We will be dead by the time this is all done!" They want 'pork' (in American political lingo).


Instead of another 'kachubari bond', I advise the government to float a proper 'ugali bond' -- with proceeds going to cereal farming, import substitution and projects exclusively done by Kenyans.

We spend over Sh200 billion yearly on food imports. This bond could repay itself over time. Hungry people are not productive workers -- for obvious reasons.

Njau Wainaina, businessman, London.

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