President Kenyatta’s Jubilee administration borrowed an average of Sh3.37 billion every day in 2020, a new report has shown.
The 2020-21 half-year budget implementation review by Controller of Budget Margaret Nyakango shows the government borrowed Sh1.23 trillion between December 30, 2019 and December 30, 2020.
This pushed the country’s debt to Sh7.28 trillion from Sh6.05 trillion, an increase of 20.5 per cent in a span of just one year.
“Increased public borrowing may result in undesirable fiscal consequences such as high interest rates, inflation and overburdening of future generations,” Nyakango warned in the report.
The CoB warning adds to the growing criticism and concerns by financial experts, politicians and the general public about the Jubilee administration’s appetite for loans.
Recently, Deputy President William Ruto turned against his boss and censured the government’s borrowing saying it is crippling the economy and complicating life for Kenyans.
“I think you have all heard that as of today, even the unborn babies owe out lenders,” Ruto said in Kakamega last month, attempting to extricate himself from the borrowing mess.
Economists have warned that Kenyans should brace for higher taxes to avert a situation in which the country will not be able to meet its debt obligations.
According to the report released by Nyakango’s office last Friday, the huge debt is eating into development and other crucial services, with nearly 50 per cent of revenues going towards repayments.
It shows that between July 1 and December 31, 2020, the government spent Sh350.32 billion in debt repayment.
This represented 38.7 per cent of the gross estimates and 48.2 per cent of the ordinary revenue collected by the Kenya Revenue Authority.
“This expenditure exceeded that on development programmes, which stood at Sh230.89 billion during the period,” the report reads in part.
Observers have said 2020 was one of the toughest years after Covid-19 pandemic hit the globe.
The virus ravaged world economies as countries imposed measures to contain its spread.
Treasury CS Ukur Yatani cited the pandemic for slow revenue performance – perhaps explaining the borrowing to fight the virus and finance other government operations.
The government introduced tax relief measures including a lowered pay as you earn rate and a lower rate of value added tax at 14 per cent also contributed to the revenue slide.
However, the country’s debt has risen sharply since the Jubilee administration took over from retired President Mwai Kibaki’s administration in 2013.
In the current financial year, Sh904.7 billion or about 88 per cent of the Consolidated Fund Services budgetary allocation was allocated for repayment of debt.
This amount represented an increase of 30 per cent from Sh696.55 billion allocated in the 2019-20 financial year.
It comprises Sh441.60 billion for loan redemptions and Sh463.11 billion for interest repayment.
Debt repayment was budgeted at Sh641 billion in FY 2018-19, an increase from Sh462 billion in 2017-18.
In 2021-22, the National Treasury has allocated Sh1.17 trillion to pay part of the ballooning debts falling due in the course of the fiscal year.
This is about 65 per cent of the country’s revenue, estimated at Sh1.78 trillion or a third of the Sh3 trillion budget.
The Treasury has already indicated it intends to borrow some Sh930 billion next fiscal year to plug the projected budget deficit.
Already, the Yatani-led Treasury is floating yet another Eurobond to raise some Sh134 billion to finance government operations and pay salaries.
In her report, Nyakang’o warns the Treasury to take appropriate measures to ensure public debt remains at sustainable levels.
The CoB recommended to Yatani to boost revenues by expanding domestic tax sources instead of indulging in more borrowing to meet government obligations.
Nyakango’s report comes days after Auditor General Nancy Gathungu released an explosive report showing the critical Port of Mombasa could be taken over by the Chinese government if the government defaults on the Sh364 billion SGR loan.
Gathungu revealed that the assets of Kenya Ports Authority were used as collateral for the Sh363.96 billion Standard Gauge Railway loan.
The Auditor General lifted the lid on how Kenya waived its immunity in the event of a legal dispute linked to default of servicing the loan.
“KPA assets are exposed to the risk of takeover by the lender since the authority signed the payment arrangement agreement,” the audit reads.
Last month, the Parliamentary Budget Office forecast the public debt stock would hit Sh7.8 trillion at the end of the current year.
PBO projects that the debt level is to double by June 2030 and recommends that Kenya reschedules its external debt.
Treasury has asked Parliament to raise the debt ceiling beyond the current Sh9 trillion, as it has limited room to borrow. BY THE STAR