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Financing Big Infrastructure Projects in the current circumstances will hurt the economy – Expert

NAIROBI, Kenya, Jun 8 – The government’s intention of completing its big infrastructure projects may not be possible under the current circumstances.

This is according to Michael Mburugu a partner at PKF Kenya who says the pursuit of this promise will cost Kenyans heavily and lead the economy into a debt trap.

Mburugu says the government will not be able to raise enough money through taxes to meet this obligation, and will be forced to turn to borrowing.

“Based on the budget estimates that have been tabled in parliament, it is very clear that the government is more focused on infrastructure projects, perhaps to secure the legacy which is the final leg of the current administration, the only problem with that is it will not be able to raise enough finance through the taxes. It will therefore result to borrowing which will put a lot of pressure on the economy,” Mburugu said.

The firm says it would have been better for the government to offer a stimulus package to assist business to recover, which would enable them to create more employment and ultimately help the economy stand on its feet again.

Going by the budget estimates, Mburugu said very little resources have been set aside for health amidst the ongoing coronavirus pandemic.

“We would have expected to see a lot more resources diverted from infrastructure projects for purposes of securing the health of Kenyans. This is not what we have seen from the budget estimates, as well as the 2021 Finance Bill,” he said.

According to a report filed by The Standard, the government has entered into 10 new loans worth Sh132 billion to finance infrastructure projects in the last six months.

Secured from bilateral and multilateral lenders, the new facilities include Sh17.6 billion for the first and second phase of Nairobi Intelligent Traffic Systems (ITS) establishment and junctions improvement project phase two, Sh6.5 billion for ongoing Bus Rapid Transit (BRT), Sh7.7 billion for arid and semi-arid land rural roads project and Sh2.6 billion for Lake Victoria and sanitation project in Kisumu among others.

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The international audit firm has therefore urged the government to get alternative sources of financing such as public-private partnerships in order to fulfill its promise.

Mburugu’s sentiments come at a time when the country’s debt has ballooned over the last few years with 50 percent of the debt being foreign.

Official data reveals that as of September 30, 2020, the country’s total debt was Sh7.12 trillion, comprised of Sh596.6 billion in external debt and Sh514 billion in domestic debt.

The National Treasury and Planning Cabinet Secretary Ukur Yattani is expected to present the FY 2021/2022 budget at Parliament Buildings, Nairobi on Thursday.

The ministry is proposing overall spending for the year to be Sh2.97 trillion, up from Sh2.88 trillion in 2020/21.

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