Seven shillings out of every 10 collected by the Kenya Revenue Authority (KRA) in July went into repaying Kenya’s Sh5.01 trillion debt.
According to the latest figures by the Treasury, the taxman raised Sh98 billion last month out of which Sh68 billion was spent on paying off creditors - putting the share of debt to revenue at 69 per cent.
After borrowing Sh201 billion in March, the Treasury started the financial year with a balance of Sh102 billion after settling old debts owed to a syndicate of lenders and other expenses.
This included a $1 billion (Sh101 billion) syndicated loan from a consortium of banks in March last year set to mature in April 2019 but which carried a clause for payment if a Eurobond was issued before maturity.
“The closing balances include funds held in the Sovereign Bond 2018 proceeds account,” Treasury Cabinet Secretary Henry Rotich said in Friday’s Gazette notice.
KRA only managed to raise Sh98 billion from taxes following roadblocks against new tax measures instituted by the National Treasury.
Kenya Bankers Association went to court to stop the ‘Robin Hood’ tax which would have given KRA additional revenues of about 0.05 per cent on every transaction above Sh500,000.
Activist Okiya Omtatah also obtained orders halting implementation of the adjustment day clause in the Excise Duty Act of 2015 that sought to trigger new tax measures in July instead of waiting for Parliament to approve the Finance Bill in three months.
Manufacturers also lobbied Parliament successfully to stop the implementation of the Electronic Goods Management System, which was supposed take effect this month with a potential of earning KRA Sh3.6 billion annually from cosmetics, bottled water, beer, soda and cigarette.
With the country staring at lower revenues, Treasury managed to borrow Sh30 billion in the domestic market and plans to sell a Sh40 billion bond next week Wednesday.
On the expenditure side, the Government did not spend a coin on any project as President Uhuru Kenyatta’s freeze on new development started to take shape.
Ministries, departments and agencies were only paying salaries and other recurrent expenses, which amounted to Sh49 billion in the first month of the fiscal year.
Put on hold
Over Sh410.9 billion worth of projects have been put on hold under the biggest austerity scheme seen in Government in the recent past.
The Government is in talks with the International Monetary Fund (IMF) regarding a Sh150 billion emergency loan facility, with a promise to reduce the gap between revenues and expenditure to 5.7 per cent of the gross domestic product.
State officials have been talking tough against the Bretton Woods institution. Mbui Wagacha, an economist and adviser to the Presidency, said Kenya will not sign for the IMF facility to cushion the shilling so long as it is tied to stringent conditions such as the removal of bank interest rates cap and increasing taxes.
However, even with sufficient dollar coverage for up to five months, Kenya may have a lower bargaining power in actual terms especially given that the country will have to settle the first tranche of the five-year Eurobond within this financial year.