This week in Washington, the International Monetary Fund gathers to discuss what they call Kenya’s debt sustainability. They’ll speak in careful euphemisms about “preventing default,” as if default were a future event that might be avoided through more clever financial engineering like the past year.
But let us be precise in our accounting: Kenya has already defaulted. Not on its bond payments, but on its fundamental obligation – the future of its citizens. It is the future income of Kenya’s population that is leveraged in debt, and they have gotten and will get nothing in return in this trade, beyond teargas and bullets. The money is already spent, only collections remain.
The mathematics of this default are clear and present. In just two years, the average Kenyan’s income has fallen by 12%. It was just reported that a worker earning 50,000 shillings monthly now takes home 39,000 instead of 41,450 – losing 29,400 shillings each year to inflation and devaluation. This is not a theoretical default; it is a default happening now, every day, in diminished wages and vanished opportunities. Since I first came to Kenya in 2008, the inflation adjusted income of the bottom 80% of Kenyans has only declined, despite mountains and mountains of debt for “development” programs.
What the IMF fails to recognize – or perhaps chooses not to acknowledge – is that every infrastructure bond, every Eurobond, every new debt instrument is essentially selling claims on future Kenyan earnings at a steep discount. Consider last year’s 240 billion shilling infrastructure bond at 17% interest over seven years. The arithmetic is brutal: Kenyans will pay 408 billion shillings – the original 240 billion plus 168 billion in interest. Before a single road is paved, 41% of the repayment is already promised to creditors.
Then subtract what the auditor general delicately calls “leakage” – the consistent 30% of public funds that vanish to corruption. Of the original 240 billion, that’s 72 billion redirected to private accounts. What remains for actual infrastructure? Perhaps 96 billion – 23% of the total borrowed – will materialize as roads, bridges, water systems, schools.
This is the trade being made: 408 billion shillings of future wages and taxes in exchange for 96 billion shillings of actual development today. Would any sane person sell 408 shillings of their future earnings for 96 shillings today? Yet this is precisely what Kenya’s leaders have done with the income of its citizens.
The Eurobonds represent an even more explicit sale of future earnings. Their 6-8% yields appear modest until you factor in currency depreciation – the shilling falling 20-30% against the dollar over typical bond periods. Foreign investors understand this math perfectly well. They market these bonds as “high-yield frontier market opportunities,” a polite term for buying Kenyan future earnings at a discount while knowing the IMF will ensure repayment. Frankly I don’t know why credit ratings agencies rate Kenya, and not just the IMF’s money machine.
In this environment, only two assets have thrived in Kenya: bank stocks and land. This is no accident. Banks have discovered a perfect business model: borrow at an average of 2.8% from customer deposits, lend to the government at 15%, and pocket the spread with zero risk. Their stocks soar. Meanwhile, telcos have become de facto banks, extracting fees from every transaction in an increasingly cashless economy.
The only other legal home for these profits from this financial extraction is the flood into land speculation, driving prices beyond any relationship with actual wages. Also reported this week, in Nairobi’s wealthy enclaves, land prices have risen 8.2% in 2024 to 210.7 million shillings per acre. Even in satellite towns like Athi River and Mlolongo – once meant for working families – land prices have surged 12.6% to 30.4 million shillings per acre. A worker saving 5,000 shillings monthly would need 507 years to buy a single acre, assuming prices stopped rising tomorrow. This is happening because clearly in an economy where the vast majority are going on less and less there isn’t any productive investments to be made. It’s a shell game for the elite.
Yet in Washington this week, the proposed solution is more debt to pay off old debt. This is presented as “preventing default” when it is actually perpetuating a default that has already occurred. Every new loan, every refinancing, every IMF program simply extends and deepens the sale of the average Kenyan’s future at a discount.
The human consequences of this discounted future surround us. In the countryside, farmers are out-priced from land that is increasingly bought by those with access to this mountain of debt. In the cities, young people live an entire life knowing they can neither afford homes nor save for their own businesses, unless perhaps they get lucky in SportsPesa or get elected to “serve” in public office. Public hospitals refuse patients with government insurance, distrusting they’ll ever be paid from Peter’s pocket to Paul’s. These are not the symptoms of a potential future default – they are the evidence of a default already well underway.
The beneficiaries of this system – the banks, the bondholders, the politicians, and the land speculators – have essentially purchased put options on the average Kenyan’s future. If the country prospers despite the debt burden, they profit from interest and appreciation. If it falters, the IMF ensures they still get paid. It is a mathematics of heads they win, tails they win, and irregardless Kenyans lose.
This week’s IMF meetings will likely end with pronouncements about new facilities, new programs, new loans to prevent what they call default. But the truth is written in simpler numbers: in collapsed wages, in impossible land prices, in the extraction of 408 shillings of future value for 96 shillings of present development. These are not the numbers of a nation at risk of default. They are the numbers of a nation whose future has already been sold at a discount, whose true default is not on bonds but on the possibilities that debt was supposed to create.
There is another way, though it requires different mathematics – the patient arithmetic of real investment in soil and seeds, in public education and healthcare, in the kind of development that builds actual productive capacity rather than financial extraction. It means the rich may have to get poorer. But here’s a secret of being rich in Kenya: you can only join so many clubs, and have so many bedrooms. They have enough – more than enough – yet completely lack any concept of what “enough” means, while the masses cannot obtain even the basics of dignity.
Here’s a structural adjustment program worth considering: take away the guns and the teargas, and tear down the walls between the compounds of the wealthy and the corrugated homes of the poor. Let those who’ve profited from selling Kenya’s future live in community with those whose futures they’ve mortgaged. But to find this path, we must first acknowledge what has already been lost, and stop selling tomorrow to pay for yesterday.
Until then, let us be clear about what default means. It is not the missing of bond payments that the IMF fears. It is the default already visited upon millions of Kenyans whose futures have been discounted, repackaged, and sold as “high-yield opportunities” in the global financial markets. That is the default that should concern us, and that is the default that no amount of new debt can cure.
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