Kenya spent Sh228 billion to pay creditors in the first seven months of the current financial year.
This was up from Sh144.3 billion that was paid out to creditors over a similar period in the 2016/17 financial year, representing a 58 per cent increase.
The new data is contained in a statement by the National Treasury published in the Kenya Gazette on revenues and expenditure as at January 31, 2018.
This means for every Sh100 that the Government collected in taxes between July 2017 and January 2018, Sh30 went to paying debts.
This contrasts with a similar period in the previous financial year when only Sh20 was gobbled up by debts.
This is an indictment of the country’s efforts to wean itself of debt, whose payment is leaving Kenya with less money for development expenditure. While the amount of money that went to creditors rose during the period under review, tax collected during this period only increased by 13 per cent.
The country’s growing appetite for debt has raised an uproar, with the International Monetary Fund (IMF) warning that the country might plunge into a crisis similar to that of Greece if nothing is done.
Although the Bretton Woods institution is convinced that the current debt levels are still manageable, it is concerned about more borrowing.
“What we are concerned about is the flow of new debts. So the trajectory is going to a place where it will not be sustainable anymore and you will get into trouble eventually,” IMF Nairobi representative Jan Mikkelsen told members of the National Assembly last week as the country successfully issued a Sh200 billion Eurobond.
The money will be used to settle some maturing debts and development expenditures.
The uptake of more loans this year will take the country’s total debt stock to Sh5.4 trillion from the Sh4.6 trillion as at December 2017.
A growing fiscal deficit - the difference between what the country collects and what it spends - is the main reason the National Treasury and IMF staff have not completed a review of Kenya’s $1.5 billion (Sh150 billion) standby credit facility (SCF).
The country’s tax revenues in the first seven months of the 2017/18 financial year were not sufficient to cover its total recurrent expenditure - salaries to civil servants and administrative costs - which added up to Sh766.2 billion.
The difference was plugged by non-tax revenues which included grants and fees raised by government agencies.
The Kenya Revenue Authority (KRA) collected Sh753.4 billion in the period under review, up from Sh666.8 billion collected in a similar period in the 2016/17 financial year. And with the taxman expected to collect about Sh125 billion every month, this represents a shortfall of Sh122 billion. The poor collection of taxes during the period under review has been blamed on the harsh political climate for the better part of last year, which contributed to a slowdown in economic activities.
Moreover, the Government gave many subsidies, including waiving duty on imported maize, milk, and sugar.
In the remaining five months to the end of the current financial year, KRA is expected to collect, on average, Sh149 billion every month to meet revenue collection target of Sh1.5 trillion for the 2017/18 financial year.