Public debt eats up 98 per cent of revenue collected in January

 

Treasury CS Njuguna Ndungu. [Elvis Ogina,Standard]

Nearly all the money collected from taxes in January went to servicing debt, the greatest indication of the extent of the cash crunch facing President William Ruto’s administration.

Data from the National Treasury shows that the government spent 98.77 per cent of revenue to repay public debt, the highest amount in recent months.

According to the Statement of Actual Revenues and Net Exchequer Issues, a document published monthly in the Kenyan Gazette by National Treasury Cabinet Secretary Njuguna Ndung’u, the government spent Sh163.5 billion out of the Sh165.57 billion collected as taxes to pay public debt. The figures exclude money raised from government services, which form part of non-tax revenue.

This means that the Treasury mostly relied on loans to fund all the government’s recurrent and development expenditures, including paying salaries and disbursements to counties, among other needs, as it was left with a paltry Sh2 billion in revenue, further placing the nation down a dangerous slope of over-reliance on borrowing.

The statistics represent a sharp increase from the 41 per cent debt-service-to-tax-revenue ratio recorded in December last year. In December, the government spent Sh83.66 billion to service debt, out of the Sh203.5 billion collected from taxes.

In November, Sh91.4 billion went to repaying debt. The country collected taxes amounting to Sh162.6 billion, meaning that 56.21 per cent of revenue went to servicing debt.

The last time the Treasury spend this much to finance debt in the current financial year was last July when the public debt service exceeded the total tax revenue. Back then, the government warned of salary delays for public servants, citing a technical hitch.

The average debt-service-to-tax-revenue ratio between June 2023 and January stood at 62.82 per cent, an alarming statistic that the president recently said has caused him sleepless nights.

During the period, the State raised Sh1.2 trillion in taxes, paying loans worth more than Sh764 billion.

The gazetted document shows that despite the Treasury raising 67 per cent of its expenditures through tax revenue over the last seven months, it has been unable to meet budgetary needs. The government managed to raise Sh1.806 trillion from revenue and loans during this period against the required Sh1.809 trillion.

And from an opening balance of Sh2.6 billion in July last year, the Treasury entered February with a negative balance of Sh2.1 billion.

President Ruto is staring a crisis in the eye, even as he seeks to raise Sh4.2 trillion in the next financial year. His government has to raise the Sh3.6 trillion initially required for the current budget, which, according to Prof Ndung’u in the gazette statement, has since been revised to Sh4.28 trillion.

The Parliamentary Budget Office (PBO) has warned that the government risks missing its tax revenue collection target, having failed to meet the target for the first quarter of the current financial year by Sh72.5 billion. Last year, the PBO predicted total revenue misses worth Sh300 billion for the entire year.

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