Collection by KRA to pay back huge debt
A decision to go back to the Eurobond market in just six months has come back to haunt Kenyan taxpayers as debt repayments jumped 34 per cent.
Almost half of all the revenues the Kenya Revenue Authority (KRA) collects will go towards paying debt as the December 2014 Sh75 billion tap sale and two syndicated loans mature.
Kenya expects that KRA will collect Sh1.7 trillion, of which Sh870 billion will go towards debt repayments.
“This will include Sh194 billion in form of principle payments for the tap sale component for the 2014 sovereign bond and two syndicated bonds,” said the National Assembly’s Budget committee chairman, Kimani Ichung’wa.
Last year, debt payments were an estimated Sh648 billion. This has grown by Sh221 billion in just one year, and pushes non-discretionary spending to Sh962.5 billion.
This means an almost negligible amount of money will be left for development.
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Non-discretionary spending is called the consolidated funds services which, to an income earner, are deductions such as NSSF, NHIF, loans and pension, which are deducted before earnings have even hit the bank account.
This has Parliament worried and MPs are recommending drastic measures to halt borrowing by cutting spending, possibly by half.
“Under these conditions, it is critical for the Government to decelerate debt accumulation in the coming years from the planned 6 per cent to 3 per cent in line with agreements with our East African partners,” the Budget committee said.
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Parliament has told Treasury to take budget cuts seriously instead of hiding the true nature of Kenya’s debt position in unachievable tax targets, which it has not met over the last five years.
Mr Ichung’wa said the committee had observed that there had been revenue shortfalls or under-performance mainly attributed to over-projection of revenue, and as a result the shortfalls were bigger than expected and more debt was procured.
“In 2016-2017, this House committed to a deficit of 6.0 per cent but this ended up at 8.9 per cent amidst significant expenditure pressures,” he said.
Instead of dealing with the growing debt problem, Treasury has resorted to borrowing heavily in the domestic market, which has been flush with cash as a result of the interest rate cap that has seen local banks abandon the private sector.