HomeNewsKenya's Debt Crisis: Loans Maturing at a Rate of Sh50 Billion Every...

Kenya’s Debt Crisis: Loans Maturing at a Rate of Sh50 Billion Every Week

President William Ruto’s administration is currently grappling with a massive public debt burden, with loans maturing at a rate of Sh50 billion ($464 million) every week. This situation has been worsened by a revenue collection shortfall that has pushed the government to the brink, causing delays in the payment of civil servants’ salaries and disbursement of equitable share of national revenue to the 47 county governments.

In March alone, the total maturities hit Sh147 billion, according to National Treasury and Economic Planning Cabinet Secretary Njuguna Ndung’u, who appeared before the Senate County Public Investment and Special Funds committee. The debt obligations for the month of March were mainly driven by interest payments to domestic creditors, explained Prof Ndung’u, adding that the government has to service these debts to stimulate the local economy.

Furthermore, the economy is facing a perfect storm, with missed growth targets worsening revenue shortfalls and the prevailing tough times, said Prof Ndung’u. He further explained that public investments, which are the key drivers of growth, have slowed down.

Data from the Treasury shows that the debt-servicing budget is Sh1.36 trillion ($12.6 billion), down from the Sh1.39 trillion ($12.9 billion) budget that had been set aside for servicing debts by former President Uhuru Kenyatta’s administration. In January, the government spent Sh123.53 billion ($1.14 billion) on debt obligations while in February it forked out Sh66.7 billion ($617 million).

Prof Ndung’u stated that with the debt-servicing obligations falling due at the same time, revenue collection cannot match the obligations, which is made worse by other obligations, including recurrent expenditure, with the monthly wage bill averaging Sh43.9 billion ($405 million).

In June last year, Parliament voted to raise the public debt ceiling to Sh10 trillion ($93 billion) as a stop-gap measure to allow the government to borrow Sh846 billion ($7.8 billion) to plug the budget deficit for the fiscal year ending June 2023. The debt ceiling adjustment was meant to accommodate the financial year 2022/23 budget without raising the debt cap.

Senator Karungo Thang’wa asked if there was room to renegotiate the terms of the debts or to stagger repayments. Prof Ndung’u said the government had for two weeks been exploring different avenues of renegotiating both the bilateral and multilateral debts. “We are not just sleeping waiting for the rains to come and beat us. We have been constantly seeking innovative solutions together with the economic advisory council; it is only that time has not been on our side,” he said.

Kenya Revenue Authority (KRA) Legal Services Commissioner Paul Matuku, representing the acting Commissioner-General, said the taxman had collected Sh1.45 trillion ($13.4 billion) as at end of March, against a target of approximately Sh1.6 trillion ($14.8 billion), translating to a performance of 93.1 per cent. This left the KRA with a deficit of Sh107 billion ($991 million), despite revenue collection having grown by 8.3 per cent or Sh114 billion ($1.05 billion) compared to a similar period in the financial year ended June 30, 2022.

Late disbursement of funds to counties had hit the KRA hard due to corresponding delays in remitting pay-as-you-earn tax, value-added tax, and withholding tax, added Matuku. Furthermore, he revealed that Sh277 billion ($2.5 billion) is being held in tax tribunals, adding that they are engaging with concerned parties on how to have the money released.The CS further noted that Kenya’s targeted expenditure deficit stands at Sh307 billion ($2.)

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