Debt servicing bill makes short work of tax revenue

 Debt servicing bill makes short work of tax revenue

Analysts at the Treasury anticipate that debt servicing costs for the fiscal year 2022/23 will continue trending upwards.

Principal and interest amounts paid to Kenya’s creditors in July and August hit Kes177.95 billion wiping out 63.5 percent of the Kes280.23 billion collected by the Kenya Revenue Authority (KRA) in the period, a pointer to the debt mount facing the new government.

Nonetheless, the proportion of tax income channeled to debt repayment this year is a marginal 2.2 percentage points improvement from the 65.7 percent posted in the review period last year.

Compared to July and August 2021, taxman’s collections this year shot up 7.19 percent and 19.36 percent to Kes130.6 billion and Kes149.62 billion respectively.

Treasury analysts anticipate that debt servicing costs for the current fiscal year will continue trending upwards and close at Kes1.39 trillion or 67 percent of the Kes2.07 trillion targeted by the exchequer.

At this pace, debt servicing costs are projected to exceed the Kes1.18 trillion lined up for national government spending including recurrent expenses such as salaries, operation and maintenance costs.

As of 2021, the country’s debt to DGP ratio was estimated to be about 68 percent of the GDP following a determined borrowing spree over the decade-long tenure of former President Uhuru Kenyatta.

As repayment for the array of credit facilities gains steam, the Treasury will put in even more effort into debt repayment to stave off a debt default situation that would erode Kenya’s creditworthiness in the face of domestic and external lenders.



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