The ratio of debt service to tax revenue in the eight months to February hit a new record of 84.4 percent, leaving very little for development projects as well as pushing the country deeper into debts.
Exchequer data on public finance performance over the eight-month period revealed that tax revenue stood at Sh1.37 trillion while Sh1.16 trillion was paid to creditors.
The rise in debt service costs comes when the country is struggling to grow tax revenue, meaning a thinner spending on development that drives economic growth and also more borrowing to run government.
In a similar period in the last financial year, Kenya spent 55.9 percent equivalent of its revenue to service debt and 59 percent in the year before.
Official data also shows that the government had spent a paltry Sh156.9 billion on development projects against a full-year target of Sh457.2 billion.
Further analysis reveals that development, which plays a big role in job creation, only accounted for seven percent of the eight-month spending. The underperformance of the tax revenue means for the taxman to meet the full-year target of Sh2.5 trillion, he has to collect Sh1.13 trillion in four months.
The Parliamentary Budget Office (PBO) which advises lawmakers on budget and economic affairs has warned that the tax target will be missed by Sh330 billion.
Difficult times
The anticipated miss which represents 13.2 percent of the full-year target, has been blamed on an underperforming economy as people reorganise their budgets to manoeuvre the difficult times.
The statistics paint a grim reality the country is facing having squeezed taxpayers further as more cash goes to service debt and little goes to development.
The country’s debt level has risen significantly over the past 11 years as it sought to get financing for huge infrastructure projects, other budgetary support and finance the Covid-19 war.
Spending on interest and redemption for the full financial year was budgeted at Sh1.86 trillion with huge repayments going to domestic interest and the 2014 Eurobond that matures in June.
Other huge repayments in the financial year include China taking an estimated Sh112.4 billion and the World Bank Sh55.18 billion.
According to the Treasury, public debt stock by the end of January stood at Sh11.2 trillion, representing 69.7 percent of the country’s Gross Domestic Product.
