Earlier today, I took part in a discussion on the "Pressure Point" weekly Space on X, where I am a regular contributor. 

This particular discussion featured @otienowill and other speakers. The theme was "State of the Nation" and included an extended discussion of our national debt and its impact on the economy.

After that discussion, I felt compelled to share my thoughts on the state of Kenya's economy, and what I believe are the root causes of our debt crisis.

Generally, I feel like there is a bit too much emphasis on "auditing the debt register", as it were, without anywhere near enough emphasis on what I believe to be the key contributors to our debt crisis.

Just to be clear: the insistence on auditing the debt to ensure we owe only what is legitimate is valid and reasonable. 

That having been said, I argue that the root causes of our unsustainable debt levels must be understood, if we are serious about overcoming the current situation, and not getting back into a situation like this again.

Why are we borrowing so much? How are we using these borrowed funds? And what are the economic implications of borrowing and paying interest at the levels we are currently borrowing? To frame this, let us look at Kenya's debt journey, its causes, impacts, and possible solutions.

Take a look at picture 1 attached here. It shows the alarming growth of our country's national debt over the last 10 years. 

From independence in 1963 to 2013, our national debt never exceeded KSH 2 trillion. Under President Mwai Kibaki, widely regarded as an economic reformer, the debt remained within this limit, even as the country experienced robust economic growth.

Kibaki's presidency was the model of fiscal discipline and balance sheet management. Look at picture 2, specifically the third and fourth columns.  These columns provide crucial insights into the relationship between Kenya's debt growth and GDP growth under different administrations.

During Kibaki's presidency, debt growth was modest relative to GDP growth. For example, in 2007, debt increased by only 1.54% while GDP grew by 6.9%. 

In stark contrast, under Uhuru Kenyatta, debt growth far outpaced GDP growth, consistently. In 2017, for example, debt grew by 21.76% while GDP rose by only 3.8%. In 2020, debt growth was 15.24%, while GDP actually shrank by 0.3%. This has been the case in the last 10 years. Very high growth in debt, matched by mediocre growth in GDP. 

This imbalance highlights a shift from efficient economic management to reckless borrowing, and is anecdotal evidence of corruption and inefficiency.

So the question is, why were we borrowing so much and achieving so little economic growth?

The 2013 constitutional reforms created a devolved system of government. While intended to enhance accountability and development, this system led to:

(1) Overrepresentation: As shown in Picture 3, Kenya has 2,643 elected representatives, including 47 governors, 290 MPs, and over 2,200 MCAs. In contrast, Texas, with an economy 21 times larger, has only 181 elected representatives. If someone wants to argue that we should have over 10 times the number of representatives other democracies have, I am willing to listen, but the argument better make sense. 

I can tell you; this huge number of politicians is not resulting in better representation and better outcomes. Let me give you some anecdotal evidence. Across our country, we have unprecedented levels of corruption, wastage, and killer financial malfeasance in County Executive Branches. Your MCAs are spending months in Dubai, Singapore, Germany, Canada, and other places. They are not serving as a check on corruption and wastage. See picture 4 for a hint. Do not kid yourself that they are performing well.

(2) Inefficiency: Each Kenyan MCA represents about 20,000 people, compared to 166,000 people per representative in Texas. This bloated system is costly and inefficient. 

(3) Exorbitant salaries. Kenyan politicians are among the highest-paid globally relative to GDP size. Think about this: A Kenyan MP earns 3,586% of the average citizen's income. Yes, that is 3,586%! 

In Texas, a representative earns around 58% of the average Texas's income. Because of this, people that go into politics have a different reason for doing so. Public service, desire to shape policy, etc. 

Their primary goal is not to mooch off the average citizen. We need this type of system. Reduce the number of politicians and reduce the compensation. In any case, we cannot afford high compensation.

(4) Economic mismanagement and wasteful spending. The devolved system has enabled wasteful spending in ways we never imagined. 

Imagine this: in 2022-2023, our county governments spent:

KSH 17 billion on travel.

KSH 8.0 billion on cars for Governors and MCAs.

KSH 1.3 billion on allowances for MCAs.

Guess how much they spent on education/bursaries?

KSH 6.7 billion, combined. In all 47 counties, for all the millions of children in Kenya.

Let me give you specific examples:

In Migori County, KSH 9.6 billion was the budget in 2022-2023. 

This county which has a 48% poverty rate:

But it:

(a) Spent KSH 924 million on luxury travel, in one year.
(b) Spent KSH 178 million on governor's vehicles, in one year.
(c) Spent Only KSH 120 million on bursaries/education for all county children.

Which is to say that, the county has no idea why it exists in the first place.

To make matters worse, there is no real mechanism for us as a country to enforce economic discipline. 

The average county in 2022-2023 only raised 6% of its budget. 6%.

Now, imagine a situation where someone gave you a credit card, and told you that you can buy anything you want, as long as you pay 6% of its cost.

Doesn't matter what it is.

What are the implications?

All of a sudden, you can spend KSH 285 million on a mansion in the jungle like @Mandera_cgvt did for its Governor. @MohamedAKhalif - how is the mansion in the jungle? @aliiroba - you must really miss that ambience. 

If you are @orengo_james in @of_siaya you can spend KSH 125 million on "boreholes in 30 ward offices" - and call that "development".

Let me say that again. You can drop KSH 125 million, to dig boreholes in ward offices, which house county politicians, and call that development.

When you are done with that, you can drop KSH 150 million to build "halls" for MCAs. A freaking KSH 150 million. And call that development.

But you are not done. Not by a long shot. You can spend KSH 102 million, on "networking and cabling"-basically, installing internet and network at MCA offices. KSH 102 million, to apparently install internet, at MCA offices. And call that development.

If you think am kidding, you have never been more mistaken. 

That, ladies and gentlemen, is the "leadership" of county government genius, @orengo_james and his equally brilliant MCAs. 

That 48% poverty rate doesn't mean a damn thing. Dilapidated hospitals and schools do not mean a damn thing.  

I want you to understand that in @of_siaya in 2022-2023, the three "projects" I laid out above, were by far, the three largest "development projects" in that year. 

Not a state-of-the-art hospital. Not a road. Not much needed equipment for hospitals. Not improving schools.

It was all about MCA offices.

(4) Corruption. Every single year, corruption takes about 20% of our entire budget, about KSH 800 billion, leaving citizens with little to show for the debt incurred. This systemic theft requires immediate attention. 

In closing:

Servicing debt consumes a significant portion of our national revenue, leaving little room for critical investments in education, healthcare, and infrastructure. Today, we spend more money paying interest on debt, than we spend on education, healthcare, and national security, COMBINED.

High debt levels lead to increased taxes, higher costs of living, and reduced public services, further burdening ordinary citizens.

How do we get out of this mess?

(1) Understand the causes of our fiscal indiscipline and make changes.  In my view, our government is too large and too expensive. 

Reduce the number of elected representatives and align salaries with economic realities. For instance:

- Merge constituencies to reduce MPs.
- Cap county budgets for salaries and travel.
- Find ways to cap overall county budgets (for example, make the budget a factor of "own service revenue. You can say, you cannot budget to spent more than 5 times your own service revenue. It's an example.

(2) Combat Corruption. Audit all contracts issued since 2013 and prosecute offenders. Corrupt officials must face consequences, and ill-gotten wealth should be recovered. Additionally, focus on eradicating corruption in government business going forward.

(3) Conduct a Comprehensive Audit. While not the sole solution, auditing the debt is essential to identify illegitimate claims and cases of corruption.

(4) Change leaders. There is a reason why we are in this mess. We have had selfish leaders, corrupt leaders, and wasteful spending. Equally damaging, is our failed parliament. How does a country increase its debt by 450% in 10 years, while its economy only grew by a third of that rate? Answer: parliament has totally failed in its oversight role.

I want you to think about the likes of @HonOscarSudi and @pksalasya etc. 

Now, understand that, this is who you have put into parliament and given the responsibility of governing, and overseeing the Executive Branch. 

Would you hire these two to run your MPESA kiosk?
  
That is a rhetorical question. 

@SiayaCountyKE @orengo_james @WilliamsRuto @KenyaGovernors @Mandera_cgvt @MigoriCountyGov @MigunaMiguna @dancan_onyango1 @Mizani254 @OkiyaOmtatah @Senate_KE @NAssemblyKE @WanjiruGithiomi @EricLatiff @ericomondi_