Debt payments gobble up 55pc tax

The Treasury spent Sh81.06 billion more on debt repayments in the first four months of the current financial year than a year ago, latest exchequer statistics show, largely driven by dues to domestic creditors.

Debt repayments took up Sh276.17 billion in the July-October period, acting Treasury secretary Ukur Yatani says in the Statement of Actual Revenues and Net Exchequer Issues, a 41.55 percent jump from Sh195.11 billion in the same period a year earlier.

The amount spent on servicing public debt is equivalent to 55.42 percent of the Sh498.32 billion the Kenya Revenue Authority netted from taxpayers in the period, a bigger chunk than 44.39 percent of the Sh439.50 billion total tax collections in the same period a year earlier.

The Treasury does not usually break down debt payments by creditors in the monthly report, but the period was marked with increased maturities in short-term debt with a repayment period of between three months and one year.

Analysts at Genghis Capital, for example, put Treasury bills maturities between July and September at Sh346.9 billion, with another Sh222.5 billion due for payment between October and December.

In the July-October period, debt repayments were the second single largest government spend after recurrent expenses such as salaries, allowances and administrative expenses which gobbled up nearly Sh306.53 billion.

Recurrent expenditures in the period were Sh21.32 billion more than the Sh285.21 billion spent in the same period the previous financial year.

The cash paid to creditors is nearly double the Sh140.10 billion disbursed to development projects (Sh73.99 billion) and 47 counties (Sh66.11 billion) over the review period.

The Treasury plans to spend nearly Sh696.55 billion on foreign and domestic debt obligations by end of this year in June 2020, which will be Sh129.65 billion, or 15.69 percent, less than Sh826.20 billion in the year ended last June on reduced foreign debt maturities.

Mr Yatani has pledged to reduce expensive borrowing in favour of concessional loans from foreign lenders at a time when the country is classified as a lower middle-income economy, reducing access to lowly-priced credit especially from the World Bank.

“There’s little that will happen if we don’t bring the budget deficit down,” Ms Phyllis Makau, executive director of Parliamentary Budget Office told a forum in Nairobi. “The non-discretionary expenditure is on the rise.”