The government has resorted to borrowing from private citizens and moneyed companies to raise funds to service foreign debt.
Controller of Budget Margaret Nyakang’o on Thursday revealed the country's debt has hit an all-time high with the government now unable to service the loans from its ordinary revenue.
Kenya's debt currently stands at Sh7.71 trillion.
On Wednesday, Central Bank of Kenya Governor Patrick Njoroge called for immediate action to manage the ballooning debt lest it bring down the economy.
In a new report tabled before a Senate committee, Nyakang’o revealed that for every Sh3 collected by the Kenya Revenue Authority, Sh2 goes towards the repayment of the debt.
The Finance and Budget committee chaired by Kirinyaga Senator Charles Kibiru is inquiring into the status of public debt.
As the Treasury continues to borrow and spend a fortune on repayment, it emerged the government has spent Sh1.65 billion as of June 30, 2021 on commitment fees on loans that it has not utilised or whose agreement has not been signed.
The revelations emerged even as the Commission on Revenue Allocation turned the heat on Parliament for abetting the heavy borrowing by the National Treasury.
“Parliament plays a critical role in the approval of the budget and this is where vigilance is required to ensure fiscal deficits are sustainable at the budget approval stage,” CRA chairperson Jane Kiringai said.
Kiringai said Parliament needs to set the bar for transparency and debt management, interrogate Treasury’s annual borrowing plans and interest rates at which the government is borrowing.
Parliament should also interrogate the use of the loans, she said.
The commission accused the legislators of failing to check the borrowing and curbing huge budget deficits that have provided room for more borrowing.
According to the report by the COB, the Treasury borrowed Sh67.85 billion in the month of July alone—the first month of the 2021-22 financial year.
Shockingly, Treasury spent Sh162.37 billion in debt repayments against Sh253.4 billion generated by the taxman during the month.
This translated to 64.1 per cent of the ordinary revenue.
“The COB recommends renegotiating debt repayment agreements and slowing down of borrowing to ensure tax revenue collected is geared towards financing other components of the budget,” she said.
The crisis, the COB disclosed, has forced the state to raid the domestic market with borrowing from non-bank entities—private citizens and companies—emerging as the new catch.
“That (non-bank entities) means individuals. All you need is an account at the Central Bank. You have to register with the Central Bank then they give you a number for investment. You can invest either as a company or individual. It is grouped as non-bank,” Nyakang’o told the Star after the meeting.
Link - Alarm as state borrows from wealthy Kenyans to pay loans (the-star.co.ke)
Controller of Budget Margaret Nyakang’o on Thursday revealed the country's debt has hit an all-time high with the government now unable to service the loans from its ordinary revenue.
Kenya's debt currently stands at Sh7.71 trillion.
On Wednesday, Central Bank of Kenya Governor Patrick Njoroge called for immediate action to manage the ballooning debt lest it bring down the economy.
In a new report tabled before a Senate committee, Nyakang’o revealed that for every Sh3 collected by the Kenya Revenue Authority, Sh2 goes towards the repayment of the debt.
The Finance and Budget committee chaired by Kirinyaga Senator Charles Kibiru is inquiring into the status of public debt.
As the Treasury continues to borrow and spend a fortune on repayment, it emerged the government has spent Sh1.65 billion as of June 30, 2021 on commitment fees on loans that it has not utilised or whose agreement has not been signed.
The revelations emerged even as the Commission on Revenue Allocation turned the heat on Parliament for abetting the heavy borrowing by the National Treasury.
“Parliament plays a critical role in the approval of the budget and this is where vigilance is required to ensure fiscal deficits are sustainable at the budget approval stage,” CRA chairperson Jane Kiringai said.
Kiringai said Parliament needs to set the bar for transparency and debt management, interrogate Treasury’s annual borrowing plans and interest rates at which the government is borrowing.
Parliament should also interrogate the use of the loans, she said.
The commission accused the legislators of failing to check the borrowing and curbing huge budget deficits that have provided room for more borrowing.
According to the report by the COB, the Treasury borrowed Sh67.85 billion in the month of July alone—the first month of the 2021-22 financial year.
Shockingly, Treasury spent Sh162.37 billion in debt repayments against Sh253.4 billion generated by the taxman during the month.
This translated to 64.1 per cent of the ordinary revenue.
“The COB recommends renegotiating debt repayment agreements and slowing down of borrowing to ensure tax revenue collected is geared towards financing other components of the budget,” she said.
The crisis, the COB disclosed, has forced the state to raid the domestic market with borrowing from non-bank entities—private citizens and companies—emerging as the new catch.
“That (non-bank entities) means individuals. All you need is an account at the Central Bank. You have to register with the Central Bank then they give you a number for investment. You can invest either as a company or individual. It is grouped as non-bank,” Nyakang’o told the Star after the meeting.
Link - Alarm as state borrows from wealthy Kenyans to pay loans (the-star.co.ke)
