Ruto targets to borrow KSh3.6 trillion in his first five-year term, upending his plan to go slow on debt.
The Sh3.6 trillion is 89 percent of the record Sh4.1 trillion borrowed by Uhuru Kenyatta in the five years leading up to June 2022.
The borrowing, at Sh3.6 trillion, is higher than the Sh2.7 trillion Mr. Kenyatta racked up during his first tenure and the Sh1 trillion borrowed by the late Mwai Kibaki during his final five-year term.
It was anticipated that, after promising to increase tax collections over the following five years, the Ruto administration would reduce new borrowing by a wider proportion.
However, the surge in expenditure under the so-called Bottom-Up economic plan, which aims to direct funds to industries with a large potential for income and job creation, has prevented further reductions in the nation’s borrowing.
From Mr. Kenyatta’s final yearly spending of Sh3.0 trillion, Ruto’s budget would surpass Sh5.1 trillion in the fiscal year ending in June 2027.
The additional expenses are expected to wipe out the additional taxes as the government sets a target to increase Kenya Revenue Authority (KRA) collections to Sh3.78 trillion in June 2027 from the current Sh2.19 trillion.
The Treasury had targeted borrowing Sh862 billion in the current fiscal year that runs until the end of June, but the Ruto administration has since cut the target to Sh849 billion and Sh695 billion in the next fiscal year.
This is in line with the Treasury’s call in a report for Kenya to “move from dependence on debt to dependence on revenues that are raised by taxpayers”.
Meanwhile, Kenya is at high risk of debt distress, according to the International Monetary Fund (IMF), and had a ratio of the debt-to-gross domestic product of 62.3 percent as of October.
Kenya currently spends more than half of its tax revenue on servicing liabilities, and the IMF reckons the position places the country at a high risk of debt distress.
Kenya’s debt increased more than four-fold to Sh8.58 trillion ($71 billion) under Mr. Kenyatta, who invested heavily in new rail links and other infrastructure.
The public debt rose to Sh8.9 trillion as of November, according to central bank data.