Whenever you want to gauge the true and accurate status of the government’s financial health, look at that publication titled ‘statement of actual revenues and net exchequers issues’, which is published in the Kenya Gazette every month by the Cabinet Secretary for Planning and Finance.
It is the only legal single source of truth on financers of the government. Indeed, most of the accounting and financial information published by the government is unreliable, misleading, contradictory- and presented on mere Excel sheets.
So, what disclosures are contained in the statement of actual revenues and exchequer issues?
First, opening balances of government accounts and finances from July 1 of any year. Second, all revenue receipts to the end of the reporting month. Third, all exchequer issues to the end of the reporting month.
Fourth, movements in the Consolidated Fund Services to the end of the reporting month, fifth, exchequer issues to the county government.
Finally closing balances on the consolidated account to the end of the reporting month.
The latest statement on actual revenues and exchequer issues was published in the Kenya Gazette on February 16, 2024.
I mostly rely on information and analysis developed by a financial consultant friend of mine, who keeps track of government accounting and financial information, regularly.
Since 2010, this guy has been painstakingly collecting all the gazette notices with the relevant disclosures – casting the information in a proper and modern accounting format- and developing spreadsheets, dashboards and heat maps.
You can track movements and scrutinise government finances and flash the danger signals when the government is about to tip over the public debt’s cliff edge.
What has Prof Njuguna Ndung'u disclosed in the latest instalment of the statement of actual revenues and exchequer issues?
A very bleak picture, to put it mildly. Here are the highlights. First, total debt service as a percentage of revenues in January 2024 was at a shocking 96.8 per cent. It means that out of every Sh100 collected by the Kenya Revenue Authority, Sh96 is gobbled in repaying the mountains of debt in the government’s books. If you minus the money that goes to salaries, it implies that the government is in dire financial straits.
Why were the January numbers for debt service to revenues so dizzyingly high? The parameters on this key matrix virtually doubled from Sh83. 6 billion in December to Sh163 billion in January?
Part of the reasons must be seasonality of revenues. As we all know, revenues peak up in December, driven by year-end tax payments.
Another factor at play is the Central Bank of Kenya-instigated high interest rates regime on government paper, that must have led to steep increases in redemptions of maturing Treasury Bonds.
With the period between the months of January to March traditionally regarded as relatively drier seasons in terms of tax revenues, it remains to be seen how the government’s finances will look like in the coming months.
Just the other day, an eight-year infrastructure bond hit subscriptions of a massive Sh280 billion, locking in 18 per cent in a higher for longer interest play.
Clearly, the signal to the markets is that the government is willing to pay generously to borrow.
Lately, top government officials have been on rooftops touting how the Eurobond it issued recently was a vote of confidence on Kenya by the international investing community - how it was a signal of green shoots of the economy’s recovery.
As we all know, On Feb 12, the government on February 14, issued a new $1.5 billion Eurobond maturing in 2031 at a yield of 10.45 per cent.
The money raised from the new Eurobond will be used to buy back most of the 2024 Eurobond that is maturing in June this year.
Truth be told, and as many sober analysts have said, Kenya has merely kicked the can five years down the road. Yes, the debt doesn’t have to be paid immediately. But the reality is it must still be serviced. The pressure on cash flows will not cease.
We were desperate because we were unable to raise the money to settle the maturing Eurobond in June.
So, we have chosen to pay a heavy price by kicking the can down the road.
Investors have spoken loudly and clearly by imposing on Kenya the highest interest rates on any Eurobond issuer in sub-Saharan Africa.
What Kenya needs right now are leaders committed to re-energising the entrepreneurial spirit of the private sector and to the country out of the high-debt, low-private investment and sluggish growth malaise.
The writer is a former managing editor of The EastAfrican.
