Kenyan taxpayers to be met with heavier tax burdens
As a result of increased borrowing during President Willam Ruto’s first year in office, Kenya’s total debt has surpassed Ksh10 trillion ($68 billion), putting more repayment responsibilities on the taxpayer.
Kenya’s debt stock will be Ksh10.189 trillion ($69.3 billion) at the end of June 2023 compared to Ksh8.579 trillion ($58.4 billion) in June of last year, according to new figures from the Treasury and the Central Bank of Kenya (CBK).
The National Treasury’s earlier predictions for the rate of debt buildup have been surpassed. For instance, the Treasury predicted the country’s debt stock would be Ksh9.412 trillion ($64 billion) at the end of June 2023 in its 2023 Budget Policy Statement.
Additionally, the debt stock has already surpassed the Ksh10.13 trillion ($69 billion) estimate for June 2024, reflecting the faster-than-anticipated growth of governmental debt and borrowing.
Kenya’s governmental debt is divided, with Ksh5.452 trillion ($37.1 billion) going to foreign borrowing and Ksh4.736 trillion ($32.2 billion) going to domestic borrowing.
Foreign loans account for 53.51 per cent of total debt, while domestic borrowing accounts for 46.48 per cent. Foreign loans have increased since reaching a low of 50.01 per cent in June 2022, while domestic borrowing has slowed down from a high of 49.98 per cent over the same time.
The shilling has lost over 20% of its value versus the US dollar so far this year, which has contributed to the quicker rise of foreign borrowing.
However, despite being largely shut out of the global capital markets, Kenya has maintained access to multilateral funding, with lenders like the World Bank and the International Monetary Fund (IMF) continuing to be essential for budget assistance.
For instance, the IMF authorised the payment of Ksh61.1 billion ($415 million) to Kenya in July, increasing the total amount of payments made to the nation since April 2021 to Ksh300.1 billion ($2.04 billion).
The Washington-based lender also authorised the transfer of Ksh81.1 billion ($551.4 million) as part of a brand-new initiative called the Resilience and Sustainability Facility to aid Kenya’s efforts in battling the consequences of climate change.
To close the financial shortfall in 2023–2024, the Treasury will keep utilising concessional funding from international organisations.
The Treasury increased its forecast for net foreign financing from Ksh131 billion ($891.2 million) to Ksh449 billion ($3.1 billion) due to concessional financing.
The exchequer has reduced its reliance on local finance because of the improved chances for foreign financing, with the aim dropping from Ksh587.4 billion ($4 billion) to Ksh415.3 billion ($2.8 billion).
The Treasury reports that the government is still dedicated to fiscal consolidation, which it expects to be substantially accomplished through improved revenue mobilisation, notwithstanding the faster-than-expected expansion in the country’s debt stock.
The Public Finance Management Act of 2012 was recently changed by the National Assembly, changing the cap on Kenya’s debt from Ksh10 trillion to a moving target/placeholder of no more than 55% of GDP in present value terms.
