Economy

A fifth of budget will take care of interest payments

parliament

Parliament in session. FILE PHOTO | JEFF ANGOTE | NMG

A fifth of President William Ruto’s first Sh3.6 trillion budget will go towards interest payments on public debt, highlighting the growing burden taxpayers shoulder to finance the exchequer through additional taxes.

The budget, which is an increase of Sh240 billion compared to Sh3.36 trillion in the current fiscal year, comprises Sh1.508 trillion in recurrent expenditure, Sh718.9 billion in development expenditure and Sh385.4 billion in county equitable share.

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Consolidated Fund Services (CFS) have been allocated Sh985.9 billion, with an additional Sh850.1 billion earmarked for debt redemption, though this is rolled over.

The national government share will see the Executive take the lion's share of Sh2.16 trillion, out of which Sh7.86 billion has been allocated to the Equalisation Fund, Sh2.8 billion to the Contingency Fund and Sh7.99 billion to the office of the Auditor-General.

Parliament has been allocated Sh40.4 billion while the Judiciary will receive Sh22.99 billion in the financial year starting July 1.

“Notably, the CFS expenditure amount includes Sh775.14 billion in interest payments on debt and Sh850.1 billion in principal debt redemption,” Kiharu MP Ndindi Nyoro, who chairs BAC, said in the report on the 2023/24 budget estimates tabled in Parliament.

“The statutory CFS expenditure is set to increase by 13.6 percent (Sh118.3 billion). The main drivers of the increase in CFS expenditures are Sh90 billion in interest payment on domestic debt, Sh16 billion expenditure on pension and Sh8.4 billion in interest payment on foreign debt.”

The BAC said that CFS expenditure will continue to exert fiscal pressure during budget implementation.

“Further, the depreciation of the Kenya shilling is worsening the debt situation due to high expenditure on debt servicing,” Mr Nyoro said.

Official data show Kenya’s public debt hit Sh9.4 trillion as of the end of March this year with the debt-to-GDP ratio standing at 64.7 percent.

Read: How Ruto's first budget will affect families and businesses

BAC has also questioned the ambitious revenue collection target of Sh2.571 trillion, which represents a 17 percent increase relative to the expected 2022/23 collections.

Historically, ordinary revenue has grown at an average of 10 percent.

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