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Treasury seeks Sh17.6bn in budgetary requests to pay KRA debt from July
The National Treasury building in Nairobi. Treasury’s borrowings from the Central Bank of Kenya (CBK) emergency kit have hit an all-time high of Sh107.5 billion.
The National Treasury has signalled plans to clear more than Sh17 billion it owes the Kenya Revenue Authority (KRA) from the next financial year.
Treasury officials have in fresh budgetary requests to the National Assembly included more than Sh6 billion that was approved to be handed to KRA in the previous financial years, but never disbursed.
Treasury Principal Secretary Chris Kiptoo says the amount has turned into debts to KRA staff, contractors and suppliers, meaning the agency continues to accumulate interest and penalties for continued nonpayment.
It emerged that the Treasury did not disburse Sh6.06 billion which was part of the KRA budget approved by lawmakers for financial years 2022/23 and 2023/24.
“These amounts had already been committed in expenditure items which have now turned into debt,” Dr Kiptoo said in a report to the National Assembly’s Departmental Committee on Finance and National Planning.
“It relates to staff costs, contracted service costs and operations and Excisable Goods Management System (EGMS) debt.”
The documents show that KRA’s liabilities to employees, contractors, and suppliers as a result of failure by Treasury to wire all budgeted money to KRA last financial year ended June 2024, stands at Sh4.06 billion.
KRA further owes SICPA Security Solutions SA, the Swiss firm it contracted to supply excise stamps, some Sh2 billion which was due in the financial year ended June 2023, but not released due to unavailability of funds.
The Sh2 billion was approved through a supplementary budget. The latest disclosures show the debt to SICPA was about Sh3.62 billion at the end of the fiscal year ended June 2024.
“The amount payable for the supply of the stamps is attributable to the disproportionate pricing model for the non-alcoholic beverages, which are priced below the cost of stamps, the depreciation of the Kenya shilling against the Euro and the disproportionate volume mix between non-alcoholic and alcoholic beverages,” KRA says in the latest annual report.
The agency has since negotiated to settle the debt in shillings to avoid costs associated with movements in foreign exchange markets, it adds in the report.
The Treasury is further seeking a green light from the lawmakers to include Sh11.57 billion in the KRA’s budget for the year starting July to cater for staff remuneration. The “deferred” budget had been approved for the current fiscal year but remains unfunded.
The cash will cover “costs to meet personnel emoluments for the financial year 2025/26, affordable housing levy, pension, gratuity and critical staff recruitments/replacement for revenue mobilisation,” Dr Kiptoo said.
In her latest report on KRA for the period ended June 2024, the Auditor-General Nancy Gathungu said KRA's financial statement captured Sh17.37 billion as cash due to KRA from the Treasury.
“The balance is classified as a non-current asset and represents cumulative funding allocation not received by the Authority over the years,” Ms Gathungu wrote.
“The recoverability of the balance due from the National Treasury is in doubt. My opinion is not modified in respect of these matters.”
National government entities are not allowed to keep budgeted money beyond the end of the financial year in June.
Entities that realise that they will not utilise all budgeted cash within the financial year, are under the Public Finance Management law required to inform the respective accounting officer by February, to surrender the money to Treasury for re-voting the following year.
KRA had a negative working capital of Sh9.36 billion at the end of June 2024, after total current liabilities amounted to Sh13.43 billion against current assets of Sh3.94 billion. This left the revenue agency in a net liability position, meaning it may struggle to settle debts when they fall due.
