Public debt repayments eat 57pc of KRA collections


National Treasury building. FILE PHOTO | NMG

For every Sh100 that Kenya collected as taxes in the three months to September, it used Sh57 on debt payments, underlining the heavy burden of mounting government borrowing.

Data from the Treasury shows that Sh214.79 billion was used for loan repayments in the first quarter of the financial year, making it the single-largest expenditure in the period to September.

The repayments accounted for 57 percent of the Sh372 billion that the Kenya Revenue Authority (KRA) collected in taxes in the period under review, denying the State the cash it needs for projects like building roads, power plants and revamping the health sector.

Kenya has ramped up spending in recent years to build a modern railway line, new roads and electricity plants, driving up borrowing to plug the Budget deficit.

The public debt crossed the Sh6 trillion mark in July, up from Sh1.89 trillion in June 2013, a growth that has sparked concerns that the ballooning loans risk hurting the economy due to the huge debt repayment burden.

The government has defended the increased borrowing, saying the country must invest in its infrastructure, including roads and railways, to spur growth.

The debt payment in the quarter to September is 40 percent more than the Sh153 billion that taxpayers paid in a similar period a year earlier, when loan settlement costs took 46.7 percent of taxes.

The debt repayment was more than four times the development spend of Sh48 billion in the three months to September and more than nine times that of infrastructure like roads whose expenditure stood at Sh23 billion.

The Sh55 billion allocated to the 47 counties in the three months was less than a quarter of the cash spent on paying public debt in the quarter.

A number of local and international agencies including the International Monetary Fund (IMF) and the World Bank have raised the red flag over Kenya’s rising appetite for borrowing to finance State expenditure.

Majority of African countries spend Sh1 for every Sh3 they collect in revenue on debt obligations, a pointer that Kenya’s is on the higher side.

MPs this month approved a change in the law that increased the cap for State borrowing to Sh9 trillion, giving the government leeway to further increase the public debt, already considered worryingly high.

Legislators unanimously supported the review of the law that restricted public debt at half of gross domestic product (GDP).

Kenya’s public debt as a percentage of GDP has increased to 55 percent from 42 percent when President Uhuru Kenyatta took office in 2013.