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KICC Chairperson Highlights Key Strategies to Revitalize Kenya’s Economy Amid High Debt Levels
Nairobi, September 7, 2024 — Hon. Irungu Nyakera, Chairperson of the Kenyatta International Convention Centre (KICC), shared his insightful thoughts on Kenya’s economic situation and proposed solutions to ease the financial pressure on Kenyans.
Reflecting on the current state of Kenya’s economy, Nyakera pointed out that the country is grappling with significant debt levels. The Debt-to-GDP ratio has consistently exceeded the IMF’s 50% threshold for developing nations in recent years, with figures climbing from 59.08% in 2019 to a peak of 73.26% in 2023. This year, the ratio has slightly eased to 72.97%, and projections for 2025 suggest it will stabilize around 70.32%. Notably, the Debt-to-GDP ratio was last below 50% in 2015, when it stood at 48.15%.
Nyakera emphasized that the current economic challenges are not solely the fault of the present administration but are instead a result of historical borrowing trends. To address the cashflow crisis and stimulate economic activity, he proposed two key strategies:
- Issuing Large Bonds/Debt from International Partners: Nyakera recommends raising substantial funds through bilateral or multilateral partners. These funds could be used to buy back expensive short-term treasury papers. This approach would have several benefits:
- Significant Interest Savings: Reducing the reliance on high-yield government papers will lead to notable savings on interest payments.
- Lower Interest Rates: It would potentially lower overall interest rates, making borrowing more affordable for businesses and individuals.
- Increased Bank Lending: With less government paper to absorb bank resources, financial institutions could increase lending to individuals and corporates.
- Improved Debt Management: Reducing short-term debt and extending the maturity profile will help manage cashflows and reduce rollover risks.
- Enhanced Money Circulation: By easing the debt burden, more money would return to circulation, which is crucial for economic activity.
- Settling Pending Bills to Local Companies: Nyakera suggests paying off any outstanding bills of less than KSh 100 million owed to local businesses. This payment would act as a de facto economic stimulus package by:
- Reintroducing Money into the Economy: Settling these debts would prompt companies to reinvest funds into the economy, generating tax revenues and boosting economic activity.
- Stimulating Economic Growth: The inflow of cash to businesses would serve as an economic stimulus, helping to counteract the recessionary pressures caused by a lack of money in circulation.
Nyakera’s proposals aim to address the dual challenge of high debt levels and low economic circulation, which he believes could lead to a recession and lower government revenue collections if left unchecked. By implementing these strategies, Nyakera envisions a more balanced economic environment that supports growth and stability.
As Kenya navigates its economic challenges, the insights and recommendations from leaders like Hon. Irungu Nyakera offer a strategic path forward to revitalizing the nation’s economy and fostering a more robust financial future.
