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Debt repayment holiday saves government over Sh256 billion

The government saved Sh256.4 billion by spending Sh3.08 trillion in the financial year that ended in June 2022, figures from the National Treasury show.

The government had projected to spend Sh3.33 trillion in the 2021-2022 financial year but ended up spending less, with the biggest savings being made in public debt payments.

The National Treasury paid Sh1.04 trillion to creditors in the review period, against projected spending of Sh1.15 trillion.

This means that the government saved Sh109 billion which is attributed to the debt moratorium given by some bilateral lenders, including China - the largest bilateral lender to Kenya.

This even as the Kenya Revenue Authority (KRA) for the second year beat its tax collection target netting Sh1.84 trillion against a target of Sh1.78 trillion.

The government also borrowed less than it had projected, a situation that saw its fiscal deficit — the difference between what you spend and what you collect in taxes — narrow.

The International Monetary Fund (IMF) which has a Sh276 billion conditional credit facility with Kenya, lauded the National Treasury for its impressive fiscal performance in its third review of the programme.

“Fiscal performance has been strong, with the end of December 2021 nominal targets exceeded by wide margins and robust out-turns to date,” said the IMF. The Washington-based institution noted that as of December 2021, the primary deficit fell to Sh38 billion compared to a target of Sh203 billion.

KRA collected Sh2.03 trillion in the 2021/22 financial year, the first time in history that the taxman passed the Sh2 trillion mark with its aggressive tax collection strategies paying off.

All the tax heads, including taxes on profits earned by corporates, taxes on employee salaries, value-added tax (VAT) or the sales tax, excise duty, and import duty surpassed their target in the period under review.

KRA had a tax collection target of Sh1.882 trillion in the financial year that ended last month as captured in the 2022 Budget Policy Statement.

“The positive revenue growth mirrors the improved tax compliance from taxpayers who contributed to the collection of revenue surplus of Sh148.9 billion against target, which is the highest surplus ever recorded in KRA’s history,” said KRA Commissioner-General Githii Mburu.

The taxman was also able to surpass its new higher target of Sh1.976 trillion as the National Treasury twice raised the bar for the tax agency, seeing a possibility of collecting more owing to improved economic performance after the country rolled back the containment measures against the Covid-19 pandemic.

President Uhuru Kenyatta, whose second term ends after the August 9 elections, will be pleased with this performance, given that for the most part, fiscal performance under his administration has been characterised by poor revenue collection and bloated expenditure.

This has, in turn, translated into huge debt uptake, which stood at Sh8.47 trillion as of the end of April 2022.