Kenya’s public debt grew by Sh228.96 billion during the first three months of the current fiscal year, raising the country’s indebtedness to Sh10.8 trillion as of September 2024 up from Sh10.6 trillion as at close of June.
Official data from the Central Bank of Kenya (CBK) shows that the 2.2 percent increase during the period, came in the quarter when there was a significant shortfall in tax collection by the Kenya Revenue Authority (KRA).
KRA missed its tax collection target by Sh35 billion in July, Sh25 billion in August and Sh10 billion in September following the withdrawal of the Finance Bill 2024, which opened a Sh334 billion revenue hole in the 2024/25 budget.
During the quarter, total domestic debt grew by Sh191.4 billion which represented a 3.5 percent jump to Sh5.6 trillion, while external borrowings went up by 37.5 billion which was a 0.7 percent rise.
The enhanced pace of the domestic debt’s rise corresponds with an increase in returns on government debt securities, whose holdings are concentrated in banks and other institutional investors.
The share of government domestic debt held by banking institutions stood at 45 percent at the end of September, with pension funds and other investors holding 29.12 percent and 13.43 percent respectively. Insurance firms and State parastatals held the lowest shares at 7.15 percent and 5.3 percent respectively.
On the foreign debt front, disclosures by the Treasury show that the share from the World Bank and the International Monetary Fund (IMF) more than doubled to hit a record 43.3 percent during the five-year period to June 2024.
Loans from the two multilateral lenders jumped from Sh654 billion in June 2019 to Sh2.2 trillion in June this year.
Kenya’s mounting debts have seen it commit more than half of tax revenue collected annually in repaying the public debt, leaving little cash for projects.
To shore up revenue, Kenya has deepened its crackdown on tax cheats and it is expected to be more aggressive following the withdrawal of the Finance Bill, which contained a slew of tax hikes. KRA is also seeking to expand the tax base and rope in more small businesses and the informal sector to raise additional revenues.
