Kenyan government is looking forward to borrowing an average of Sh2.5 per day before President Uhuru Kenyatta retires come 2022.
The Treasury projects in a draft Budget Review and Outlook Paper new loans of Sh1.87 trillion in the two years to June 2020, punching the country’s debt load to Sh8.06 trillion.
If it is realized, President Kenyatta administration will have borrowed at least Sh6.1 trillion in the 10 years he has been in power having inherited slightly more than Sh1.89 trillion from Kibaki’s administration.
The increased borrowing has seen Kenya commit more than half of the taxes to pay the debts, leaving little cash for development projects.
But faced with revenue shortfall amind the COVID-19-related disruptions and the push to finish the projects before the President retires, the treasury is expected to borrow more in two years.
According to the Parliamentary Budget Office (PBO), the underperformance in revenue due to the pandemic is likely to drive the country’s debt beyond the Sh9.0 trillion legal threshold, one year after President Uhuru leaves power.
“The impact of Covid-19 on the economy is expected to adversely affect revenue generation. Given the current and projected expenditure demands, it is estimated that the Kenyan debt stock could reach Sh9.2 trillion in FY 2022/23.” the PBO wrote in a budget watch report earlier this month.
In the first two months of the current financial year, the revenue collection underperformed by Sh40 billion prompting the Treasury Cabinet Secretary Ukur Yatani to plan for a supplementary budget in December or January.
Yatani told Reuters that the government was in early talks with the World Bank, for the provision of an additional budgetary support loan likely to be used in the 2021/2022 financial year.
The Treasury is planning to spend Sh904.7 on debt repayments in the 2020/2021 financial year from an Sh707.8 billion the previous year against expected taxes of Sh1.52 trillion.
Implying that nearly 60 percent will go to debt repayments.
Kenya’s access to cheaper international loans from multilateral lenders had reduced after the economy was upgraded to lower-middle-income in 2014. Making Kenya resort to expensive short-term loans.
Experts believe that increase in public debt has been driven by over-budgeting, which leads to ambitious tax targets that have massively been missed.
The Treasury reduced the overall tax collection projection for this financial year ending June to Sh1.42 trillion from the previous estimate of Sh1.51 trillion citing “persistent adverse effects of the Covid-19 pandemic” on the economy.