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{
"id": 1173419,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1173419/?format=api",
"text_counter": 164,
"type": "speech",
"speaker_name": "Kipipiri, JP",
"speaker_title": "Hon. Amos Kimunya",
"speaker": {
"id": 174,
"legal_name": "Amos Muhinga Kimunya",
"slug": "amos-kimunya"
},
"content": "already expired. Then, 20 years down the line, they start constructing the house. While the smart one goes to the bank, give their payslips and state they expect to be working in the next 10 or 20 years. They can leverage on their cash flow in the future to take debt, buy a house and enjoy its benefits forever. It is the same thing with countries. We have taken into account that the Standard Gauge Railway (SGR) will be there for 100 years. The debt taken on it cannot be paid for in the next five years. It will be paid by five generations of Kenyans over the next 100 years when the SGR will be used. We should, therefore, not be worried about debt for as long as we can look at where this debt is applied. In this House, I believe we have reports that have been submitted in terms of what the debt has been used for. The latest I tabled here was in March this year. Members may also want to look at the said reports and ask if we have used our debts as planned. The Chair of Public Accounts Committee (PAC) will also be telling us what we have done. We have borrowed Kshs9 trillion. If we have Kshs9 trillion of assets to show, then we are good to go! In this case, we have over Kshs13 trillion of assets to show. This means that we have leveraged because we have borrowed Kshs9 trillion, created assets worth Kshs13 trillion and are Kshs4 trillion better-off on a simplistic basis. I want to debunk the myth that borrowing is bad. The International Monetary Fund (IMF) used to be one of the advocates of tightening up of borrowing, that is, not beyond 60 per cent. Some economists like Mr. Michael Blanchard, a retired IMF economist, is now the biggest advocate of companies or countries to borrow as long as the rate of borrowing is less than the projected growth. It is, therefore, a growth-adjusted interest rate. If your interest rate is lower than your growth rate, then you are encouraged to borrow and crank up your economy to grow at a faster rate than it is costing you to invest in it. It is the same thing with us here; the only reason we encourage Members of Parliament to borrow is because the mortgage rate is lower than the inflation rate. It, therefore, makes sense to borrow today and have a house than trying to save all your money or even use the crude ways of accumulation of stones to ever build a house. The ideal situation, really, would not be talking about the absolute figure of an extra Kshs1 million. It would be a percentage of the Gross Domestic Product, hence we should look at this as an interim measure. There will be an election and a new administration will come in on 9th August, 2022. When they come to this august House, I encourage them to have a rate-based cap, that is, as per GDP percentage or something else. This is so that as your GDP increases, so should your capacity to borrow, as you borrow, so should your GDP increase too. We are, therefore, not limited. I imagine if Hon. T.J. Kajwang’ is told that he can only borrow Kshs5 million regardless of his earning capacity, you are basically ignoring the earning capacity of that person and putting everyone at par. If you, however, say that you can borrow up to a certain percentage, which is what SACCOs do, one can only borrow based on one's shares. The more shares you have, the more capacity you have to borrow. Basically, that should be it. This is a topic I love and from where I sit, I encourage people and companies to borrow. Typically, we expect every company to only use 30 per cent of its initial capital as a lever to borrow another 70 per cent. If you want to invest Kshs10 million in a business, you only need to raise Kshs3 million. There is a Kshs7 million that you can get out there, but at a certain rate. When you make profit of Kshs1 million, you will be doing so, but having been produced by the Kshs3 million and not by the Kshs10 million! Of the Kshs10 million, Kshs7 million does not belong to you and you paid interest on it. However, your only contribution is... If you have Kshs3 million, invest it in a business worth Kshs10 million and make Kshs1 million in profit. That is not 10 per cent. It is actually Kshs1 million out of Kshs3 million. It is, therefore, quite a good business. The electronic version of the Official Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Hansard Editor."
}