The Parliamentary Budget Office – the experts in economics and finance who advise lawmakers on the national budget—has exposed the National Treasury for failing to declare a Sh155 billion rise in debt interest and repayments.
In a Budget digest titled ‘Unpacking the Estimates of Revenue and Expenditure for 2017/18 and the Medium Term’ the House experts appear to speculate that the information was left out so as not to expose the fact that in this final year of the Jubilee administration the interest and repayments had risen from Sh466.5 billion to Sh621.8 billion.
“It is interesting to note that this information has been omitted in the Budget for 2017/18 and it is therefore not clear, what the debt service to revenue ratio will amount to especially since public debt interest and redemptions have increased substantially ...,” reads the document seen by The Standard on Sunday.
The big part of the jump is because of a Sh79 billion owed to Standard Chartered Bank which is due in the next financial year, the PBO notes.
The House experts now say that while the government is all buoyant about splashing billions on projects in an election year, the huge debt burden is likely to make it difficult to even offer basic services.
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Interest on debt and debt repayments is a problem because it is drawn as a first charge from the Consolidated Fund. This means that whatever revenue is collected has to be used to pay up, before the ministries and government departments, and even counties, get the money to operate.
“This concern is compounded by the fact that the country’s public investments which we have been borrowing for, are largely off-track and are experiencing delays in implementation which translates to delays in expected returns from these projects. The delay also increases the cost of the projects,” the PBO wrote in the digest.
It adds: “Drought, electoral challenges and expected economic slowdown could potentially affect revenue growth with implications on revenue sharing, fiscal deficit and debt sustainability”.
This comes against a backdrop of a red flag that the local office of an international budget lobby – the International Budget Partnership—has waved, alerting the country that the debt was at levels that are likely to make the country fail to pay up.
“The proportion of ordinary revenue going to debt service is very high and could crowd out basic services,” said John Kinuthia, of IBP-Kenya.
Kinuthia warned that the debt burden threshold issued by the International Monetary Fund for countries such as Kenya was 35 per cent of revenues. For instance, 36 per cent of Kenya’s ordinary revenue in 2015/16 was used to pay debt, down from 38 per cent in 2014/15.
When he addressed the House as he read the Budget Rotich said the debt was sustainable.
“To support an environment where more jobs will be created, the Government is strongly committed to pursuing prudent fiscal and monetary policies that support strong economic growth, ensures price stability and maintains our debt at sustainable levels,” said Rotich.
His view was that the huge deficit that was posted in the current financial year was because of “one off expenditures mainly those related to the General elections and the drought which are not expected to recur”.