By NATION AFRICA

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Kenya’s President William Ruto administration is reeling under a huge public debt burden, with loans maturing at a rate of Ksh50 billion ($368.32 million) every week.

The situation is compounded by a revenue collection shortfall that has further pushed the country’s government to the brink.

The resultant cash crunch has occasioned delays in the payment of civil servants' salaries and disbursement of equitable share of national revenue to the nation’s 47 county governments.

Appearing before the country’s Senate County Public Investment and Special Funds committee, Kenya’s National Treasury and Economic Planning Cabinet Secretary Njuguna Ndung’u said in March alone, the total maturities hit Ksh147 billion ($1.08 billion).

Kenya’s National Treasury Cabinet Secretary Njuguna Ndung’u. PHOTO | FILE | NMG

Prof Ndung’u told the committee led by Vihiga Senator Godfrey Osotsi that the debt obligations for the month of March were largely driven by interest payments to domestic creditors. The CS explained that most of the debts falling due at the same time are domestic.

Read: Broke Kenya eyes $1.9b emergency funding

He added that the government has to service these domestic debts to stimulate the local economy.

He said the economy is facing what he termed a perfect storm, with missed growth targets worsening revenue shortfalls and the prevailing tough times.

The treasury boss further explained that public investments, which are the key drivers of growth, have slowed down.

Debt-servicing budget down

Data from the treasury shows that the debt-servicing budget is Ksh1.36 trillion ($10 billion), down from the Ksh1.39 trillion ($10.24 billion) budget that had been set aside for servicing debts by former president Uhuru Kenyatta’s administration.

“The lumped-up maturities without corresponding exchequer receipts have led to the financial constraints that have hit the government,” said Ndung’u.

In January, the government spent Ksh123.53 billion ($910 million) on debt obligations while in February it forked out Ksh66.7 billion ($491.34 billion).

Explaining the severity of the problem, the treasury CS said with the debt-servicing obligations falling due at the same time, revenue collection cannot match the obligations.

This is made worse by other obligations, including recurrent expenditure, with the monthly wage bill averaging Ksh43.9 billion ($323.39 million).

In June last year, Kenyan Parliament voted to raise the public debt ceiling to Ksh10 trillion ($73.67 billion) as a stop-gap measure to allow the government to borrow Ksh846 billion ($6.23 billion) to plug the budget deficit for the fiscal year ending June 2023.

Members of the Kenyan Parliament during a sitting. PHOTO | SIMON MAINA | AFP

The debt ceiling adjustment was meant to accommodate the financial year 2022/23 budget without raising the debt cap.

Read: Kenya's Eurobond repayment plan

Renegotiating debt terms

Kiambu 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.

Appearing before the same committee, Kenya Revenue Authority (KRA) Legal Services Commissioner Paul Matuku, representing the acting commissioner-general, said the taxman had collected Ksh1.45 trillion ($10.68 billion) as at end of March, against a target of approximately Ksh1.6 trillion ($11.79 billion), translating to a performance of 93.1 per cent.

He explained this left the KRA with a deficit of Ksh107 billion ($788.21 million), despite revenue collection having grown by 8.3 per cent or Ksh114 billion ($839.78 million) compared to a similar period in the financial year ended June 30, 2022.

He added that 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.

Times Tower, Kenya Revenue Authority headquarters in Nairobi. PHOTO | NMG

Further, he revealed that Ksh277 billion ($2.04 billion) is being held in tax tribunals adding that they are engaging with concerned parties on how to have the money released.

Read: IMF supports Ruto revenue plan

Expenditure deficit

The CS further noted that Kenya’s targeted expenditure deficit stands at Ksh307 billion ($2.26 billion), way above the Ksh107 billion ($788.21 million) revenue shortfall.

He said government ministries, departments and agencies are owed more than Ksh311 billion ($2.29 billion) while more than Ksh94 billion ($692.45 million) is owed to the county governments in terms of February, March and April equitable-share allocations.

The treasury CS said the government is working towards introducing a raft of measures to ensure revenue targets are met.

He said they are working on a tax regime that will not distort the market.

“We want to make sure taxation does not look like a punishment but an incentive so that many people do not find themselves wanting to evade paying taxes,” said the CS.

“We must review our social contract as you cannot kill the goose that lays the golden egg unless you don’t want the egg,” he added.