HomeKenya NewsKenya's Economy in Distress as Civil Servants Face Pay Delays and Multibillion-Shilling...

Kenya’s Economy in Distress as Civil Servants Face Pay Delays and Multibillion-Shilling Loans Fall Due

In six months, Kenya will face payments of about $3.6 billion for fuel imports and a round of multibillion-shilling loans. The loans, similar to those that caused delays in public servants’ salaries, will fall due, which will force Treasury Cabinet Secretary Njuguna Ndung’u to make a difficult decision between delaying civil servants’ pay again or defaulting on public debt.

Kenya is facing a difficult economic situation because of a perfect storm created by multibillion-shilling loan maturities, below-target tax collections, a large public wage bill, and a depreciating shilling.

Council of Governors Chairperson Anne Waiguru has warned that public services, including health, will stall if the National Treasury does not remit the money.

The country will need deft economic management and fiscal discipline to address the crisis. The government may have to put in place austerity measures, collect more taxes, and consider more borrowing.

The country needs to adopt more progressive policies to have sufficient revenues. Kenya Revenue Authority is struggling to meet its targets and may not meet the Sh2.1 trillion target for the fiscal year ending in June.

The shilling is depreciating against the dollar, which implies that the country will spend more in servicing foreign loans. The government-to-government credit used to deal with monthly oil imports will also mean that the economy will face a lumpsum demand for dollars every six months.

The country faces a difficult economic situation as it approaches the payment of $3.6 billion for fuel imports and a round of multibillion-shilling loans in six months.

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