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Debt repayments to take up half of taxes

The National Treasury building in Nairobi. FILE PHOTO | NMG
The National Treasury building in Nairobi. FILE PHOTO | NMG 

Taxpayers will spend Sh870.52 billion on debt repayments in the year starting July, underlining the burden of expensive short-term debt the Treasury has accumulated in recent years.

This will represent a growth of Sh262.22 billion over the revised Sh608.40 billion repayments for the current year, the 2018-19 budget data shows.

The spend will be half of the Sh1.74 trillion that the government expects to collect in ordinary revenue.

This means about Sh50 out of every Sh100 generated in total tax and other collections such as fees and commissions will go into servicing the burgeoning public debt that hit Sh4.57 trillion last December.

The debt repayments bill will be nearly two and a half times (233 per cent) the Sh372.74 billion allocated to the 47 county governments in 2018-19 and also dwarfs the Sh610.2 billion to be spent on development projects.

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The debt obligations have, however, been slashed from the previous Sh1 trillion due to ongoing debt rollover programme where lenders are opting to extend the tenures of their maturing debt.

The Treasury estimated the rollover for this financial year at Sh192 billion, reducing debt obligations by a similar amount.

“The lenders opt to roll over or re-invest the securities for a further specific period,” Treasury principal secretary, Kamau Thugge, told the Business Daily in March.

Domestic debt repayments will rise to nearly Sh505.86 billion next year from the revised Sh368.29 billion in the current year, while external obligations will jump to Sh364.66 billion from Sh240.10 billion.

The Jubilee administration has ramped up spending since 2013 to build a modern railway, new roads, bridges and electricity plants, driving up borrowing to plug the budget deficit.

Mr Rotich projects the gap in the Sh2.53 trillion budget for the 2018-19 financial year to reduce to Sh562.7 billion, excluding grants, from Sh626.7 billion this year.

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