Parliament has directed Treasury Secretary Ukur Yatani to negotiate for interest waivers on loans with multilateral and bilateral lenders in the wake of the coronavirus outbreak.
Kenya has accumulated public debt to the tune of Sh6.29 trillion with the allocation for principal and interest payment featuring prominently in its annual budget.
MPs last week said it was through a restructuring that Kenya would ease the debt burden and free up more funds to fight the pandemic that has disrupted economic activities.
The MPs directed Mr Yatani to negotiate for total waivers on some of the loans to ease the burden on taxpayers at time revenue collections are projected to fall drastically on tax reliefs adopted to cushion Kenyans from the Covid-19 economic meltdown.
The Parliamentary Budget Office (PBO) — the unit which advises lawmakers on financial and budgetary matters — said revenue collection would drop by Sh122.2 billion between April and June due to the tax cuts that came into effect last month.
The drop in revenue collections by Kenya Revenue Authority (KRA) will increase the pressure on Kenya’s ability to pay its debt that stood at Sh6.285 trillion as at March 20, according to data by Central bank of Kenya.
“The Government of Kenya should urgently engage multilateral and bilateral lenders with a view to renegotiating loan obligations, with emphasis on waivers of interest and extensions on the repayment period, as well asking for total waivers on some of the loans to free up money to enable the government to contain the spread of the pandemic, cushion Kenyans against its social and economic effects, and address the economic impact of the pandemic,” MPs said in the notice last week.
The move comes at a time when revenue fell in the first two months with the tax reliefs on workers and small businesses set to hit KRA’s collections further.
Tax collections by the taxman dropped in the January-February 2020 period by Sh3.51 billion to Sh216.06 billion compared with Sh219.56 billion in the same period a year earlier, official data shows.
All workers earning less than Sh24, 000 were starting April 1 excluded from paying taxes while the maximum income tax rate was lowered to 25 per cent from 30 per cent.