Public Debt in Kenya: This feature on the public debt crisis in Kenya and its repercussions on the economy and individual citizens was written and published by economist Ephraim Njega: From what I have been writing on the issue of public debt for more than five years now, I have realised that very few people understand the situation we are in and what it means. It is even worse when you realise that those who are seeking leadership positions are just as ignorant.

When we were opposing the raising of the public debt ceiling from KShs 6 trillion to KShs 9 trillion in 2019, someone rudely asked me what is the big deal with the KShs 9 trillion figure.

Well, the higher the debt the higher the cost of servicing it. The higher the cost of servicing the debt the more pressure the country will be under.

Many people think that this debt issue is remote and of no personal consequences. Nothing can be further from the truth. The mounting public debt will affect you. This is how you will feel it;

1). High taxation – as the debt rises and its servicing burden increases the government will need to raise more revenues through increased taxation. High taxation is something we are already experiencing so it doesn’t need much explanation.

Naivas Supermarket in Sh. 52.3 million rent row

2). Job losses – taxation has limits and once that limit is reached then the government will have no option but to lower its costs. Many public sector jobs will be lost. Besides, high taxation will kill businesses hence private sector job losses will occur too

3). Depreciation of the shilling – over 50% of our debt is foreign. Servicing this debt requires forex outflows. This will exert pressure on the shilling and for a net importing country this will result in depreciation of the shilling. This will make imported goods more expensive and beyond the reach of many. Many businesses that rely on imports will collapse

4). Inflation – the weakening of the shilling will lead to imported inflation. For example, price of fuel could skyrocket which in turn will affect the prices of other goods and services. The deepening fiscal mess could tempt the government to print money leading to an inflation nightmare known as hyperinflation

5). Economic collapse – all the above issues will work in concert leading to an economic collapse. For instance, job losses lead to decline in aggregate demand for goods and services. Without demand no business will thrive. With reduced cash in circulation loan defaults will rise and the financial sector will collapse. and with it the economy will come tumbling down.

China firm demands over Sh. 40 billion before handing over SGR to State

In short, only those who have been looting the economy and have amassed enough to last decades will be safe. The rest of us will suffer big time. There will be nowhere to hide.