UhuRuto grew GDP by 7 percent at the cost of a 127 percent increase in debt since 2013
Ephraim Njenga, through his Facebook Timeline, has provided CBK figures to show that when UhuRuto took over power, the GDP of Kenya measured at current market prices stood at Kshs 4.745 trillion. In the same financial year (2012/2013), Kenya Revenue Authority collected Kshs 822.7 billion in revenues. As typical in Kenya, the revenue the country collects is never sufficient to fund the country’s budget, so Uhuru’s government had to inherit a total of Kshs 1.882 trillion from the previous regimes.
After being in office for four years four months, the country’s aggregate economic standing is such that the GDP stands at Kshs 7.159 trillion – an overall growth of 51%. However, according to Nderitu Karomo who commented on Ephraim’s update, the GDP performance is much worse. He wrote, “There was a rebase of economy by 20 billion dollars in 2014. For better comparison, that rebase should be put between the changeover moment from Kibaki to Uhuru. So that the economy as at beginning of Uhuru reign be measured at Kshs 6.7 trillion. As it is, it appears like Uhuru has grown the economy from Kshs 4.7 trillion to Kshs 7.2 trillion, which would be an excellent performance while in real sense they have grown the economy from Kshs 6.7 trillion. Of the 20 billion dollar rebase, I would attribute 19 billion to unrecognized economy before Uhuru took over and about a billion dollar to the one year Uhuru leadership before the rebase.”
Taking the comments by Nderitu Karomo seriously, we arrive at 7% as the aggregate growth rate over the four years UhuRuto have been at the helm of Kenya’s leadership. The annual growth rate paints a different picture, but this is because the 2014 GDP rebase makes analysts lose focus when analysing the country’s economic performance.
To grow the GDP from Kshs 6.7 trillion to Kshs 7.2 trillion, UhuRuto embarked on a borrowing spree that helped grow the country’s total debt from Kshs 1.882 trillion to Kshs 4.745 trillion, or, in GDP terms, UhuRuto increased the country’s debt to GDP ratio from 28% (rebase accounted for) to 65%. The 65% debt to GDP ratio seems way off from the official calculations that put the current debt to GDP ratio at 59%.
The borrowing spree was expected to expand the economy almost at the same rate, but the economy seems to have expanded by 7% only. An expanded economy on the other hand was expected to also increase revenue base so that the increased revenue could be used to pay the debt. Typically in a business set up, a business borrows to expand the business, the business generates extra revenues, and the extra revenues used to repay the loans plus interests and still be left with surplus that should account for profitability. Kenya seems to have done very little in that regard. Instead of expanding the revenue by close to 100% given the 127% borrowing rate, the revenue expanded by a paltry 48% – and has been noted, starting next year the country will be using more than 25% of her revenue to repay the already out of hand debts.
Given these figures, many economists led by NASA coalition’s chief economists Dr. David Ndii opine that if UhuRuto win this year’s elections, then Kenya will plunge straight into depression.