Treasury slashes revenue target while increasing debt portfolio

Treasury CS Henry Rotich. Revenue collection targets this fiscal year reduces while the debt portfolio rises. [Photo: Standard]

Revenue collection targets for 2018/2019 financial year has been slashed by Sh96 billion from Sh1.949 trillion to Sh1.853 trillion as reported by Treasury Cabinet Secretary Henry Rotich when he appeared in parliament on Wednesday.

The cut will affect revenue raised through 2021/2022 financial year due to the amendments that were made on revenue collection over the recently enacted Finance Bill 2018.

CS Rotich also raised the debt portfolio from Sh4.82 trillion to Sh5.09 trillion for the period as indicated on the 2018 Budget Review Outlook report.

Treasury noted that the government had reduced revenue target for 2019/2020 by Sh42 billion to Sh2.074 trillion well as 2020/2021 by Sh42 billion to Sh2.83 trillion while targeting a raise in projected revenues of Sh2.73 trillion in 2021/2022.

 ‘’To remedy these deviations, revenue projections for 2018/19 have been revised taking into account; revenue shortfall of Sh172.4 billion last years; a lower revenue in first two months of current year and amendments to the Finance Bill,’’ Treasury held.

Kenya Revenue Authority will collect total revenue of Sh1.673tr down from Sh1.786tr as indicated in 2018/2019 budget with public debt set to increase from Sh5.09 trillion to Sh5.977 trillion in 2018/2019 through the end of President Kenyatta’s term.

International Monetary Fund on Wednesday relegated Kenya’s default on its debt from low to moderate risk on the basis of low domestic revenue collection and high international debts.

“The higher level of debt, together with rising reliance on non-concessional borrowing, have raised fiscal vulnerabilities and increased interest payments on public debt to nearly one fifth of revenue, placing Kenya in the top quartile among its peers,” IMF said.

The recently implemented Finance Bill 2018 seeks to raise Sh870 billion in revenue that the country hopes to service its debt with in this fiscal year.

Treasury CS Henry Rotich defended Kenya’s debt management approach saying that the country’s gross domestic product (GDP) of 51 percent compared to estimated debt was below the internationally accepted standards of 74 percent.

‘’This debt performance is attributed to the high level of concessionality of current external debt and positive outlook in microeconomics indicators,’’ CS Rotich said.

The report indicates that equitable share of county governments has been reduced from Sh314 billion to Sh305 billion while equalization fund slashed from Sh9 billion to Sh5 billion.

Development Budget has been reduced to Sh623 billion by Sh52 billion against the 2012’s Public Finance Management Act which only allows a lowest of 30 percent allocation to development from the national budget.

The current situation has forced the Treasury to cut government spending by Sh83 million from a budget of Sh2.557trillion

 

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