Alarm over debts as Controller of Budget pleads with MPs to save Kenyans
By Grace Ng'ang'a
| September 17th 2021
The Government’s growing appetite for expensive domestic borrowing to supplement external loans came under sharp criticism by Senate yesterday.
So dire is the debt crisis in the country that for every three shillings collected by Kenya Revenue Authority (KRA), two shillings are gobbled by debts, Controller of Budget Margaret Nyakango revealed.
Coming a day after Central Bank of Kenya Governor Patrick Njoroge raised similar fears, it was yet another indictment of the Government appetite for borrowing with Dr Nyakang’o and Commission for Revenue Allocation (CRA) chairperson Jane Kiringai pleading with Parliament to rein in the broke Executive.
The controller of Budget told the Senate Finance committee that moneyed companies have also been targeted by the Government so as to raise funds to service the huge foreign debts.
The ordinary taxation measures cannot afford to run the country and service its spiraling debts, they said. The country’s gross public debt currently stands at Sh7.71 trillion, 52.1 per cent external and 47.9 per cent domestic.
In the first month of the 2021/2022 financial year, Treasury borrowed a whopping Sh67.85 billion. In the same month, Treasury spent Sh162.37 billion in debt repayments of the Sh253.4 billion generated as tax.
The country’s debt has increased from 49 per cent of GDP in 2013 to 68 per cent in 2020.
“The share of commercial debt has increased from 22 per cent to 36 per cent of the total debt. Commercial debts attract higher interest rates and shorter maturity compared to concessional multilateral debt,” Ms Kiringai said.
The committee chaired by Kirinyaga Senator Charles Kibiru said that on August 16, the Government borrowed Sh15.03 billion in the Treasury bonds from the domestic market to repay foreign loans.
Similarly, on June 30, 2020, the Treasury raised Sh70.16 billion from proceeds of Sovereign Bonds relating to the State Departments of Infrastructure, Water, Sanitation and Irrigation, Housing, Urban Development, and ICT and Innovation.
The Treasury then made a request totaling Sh61.52 billion thus, in the committee’s view, contravening Article 201(c) of the Constitution and section 15 (2) (c) of the PFM Act that limits borrowing to development expenditure.
Nyakang’o said something needs to be done and borrowing needs to stop if the country anticipates for a better year in 2022.
“Whatever we do this year will be able to determine our debt situation next year,” she said
Kiringai said that the status of public debt in the country is worrying since most of the monies that the country makes is gobbled by debts. She noted that the composition of external and domestic debts has changed and increased pressure on debt services, and urged MPs to use the current budget making cycle to recover lost ground.
“Parliament plays a critical role in the approval of the budget and this is where vigilance is required to ensure that fiscal deficits are sustainable at the budget approval stage,” she said
The CRA chairperson asked Parliament to set the bar for transparency and debt management, interrogate the Treasury’s annual borrowing plans and interest rates at which the Government is borrowing.
Nyakang’o argued that Kenyans are working hard but they do not know that most of the money they pay to the Government as tax, is used to pay the debts. It also emerged that the Government has spent Sh1.65 billion as of June 30, on commitment fees on loans that it has not utilised or whose agreement has not been signed.
“I wrote to the Treasury on this matter and they did reply saying that they are doing something about it but come the end of the financial year we found out there are still many outstanding fees,” she said
The law says over the medium term, the national government’s borrowing shall be used only for the purpose of financing development expenditure and not recurrent expenditure.
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