Kenya to spend half of its revenue to pay debt as from next year- Report
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Kenya will spend half of its revenue to pay the public debt as from next year according to International Budget Partnership Kenya (IBP Kenya)
Kenya will spend half of its revenue to pay the public debt as from next year according to International Budget Partnership Kenya (IBP Kenya).
The repayment of public debt will consume roughly half of the national government’s normal revenue in the upcoming fiscal year, parliament has been informed.
Public debt repayments are still accounting for the lion’s share of ordinary revenue, according to the International Budget Partnership Kenya (IBP Kenya) and the Institute of Certified Public Accountants of Kenya (ICPAK).
The two institutions claimed that public debt repayment is reducing the amount available for the division of revenue and harming allocation to counties in a joint submission on the Division of Revenue Bill 2023 to the Senate Standing Committee on Finance and Budget.
They stated that in the fiscal year 2023–2024, public debt repayments are anticipated to account for 48.6% of total spending.
“This is especially concerning in the context of current talks to increase the debt ceiling to 55 percent of GDP, which would ideally provide the government with more space to borrow,” they added.
The two noted that public debt servicing is projected to increase by 34 percent in the year 2023 from Sh930.35 billion to Sh1.25 trillion.
IBP Kenya is a Kenyan non-profit organization working to advance transparency, accountability, participation, and equity in the national and county budgeting processes.
ICPAK on the other hand is a statutory body of accountants established under the Accountants Act of 1978, mandated to develop and regulate the accountancy profession in Kenya.
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The two added that crowding out of the equitable share through increasing debt obligations at the national level raises concerns over the prioritization of financing national-level spending over spending at the county level.
“At the national level, unrealistic revenue projections coupled with accelerating expenditure levels continue to stretch the budget deficit, increasing the reliance on debt financing for direct spending,” they said.
They further noted that with limited tax revenue and growing debt obligations, public debt servicing costs increase, leaving fewer resources for counties in the form of equitable share.
“The worrying trend here is that average growth in public debt service is more than 4 times the growth in county allocation as shown by the summary above.”
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