Kenya: Big Chunk of Budget Earmarked for Servicing Rising Debt

Though Deputy President William Ruto is not the only one affected in the Budget cuts, he is among top officials in the Executive with the steepest cuts in the 2020/21 spending plan, which will see the government spend a total of Sh2.7 trillion.

The National Assembly has adopted a report of the Budget committee that will see the government spend Sh1.887 trillion in the 2020/21 financial year.

The report was adopted around 8pm Tuesday even as the MPs said the budget is insensitive to Kenyans feeling the effects of the Covid-19 pandemic.

The monies the national government seeks to spend is part of the Sh2.7 trillion budget for the year that also includes allocation to the counties and the consolidated fund.

It emerged that Sh904 billion of the budget would go to servicing debt.

While debating the report, lawmakers accused the Treasury of being insensitive to key enablers of the economy.

DEVELOPMENT EXPENDITURE

The government wants to use Sh1.887 trillion on recurrent and development expenditure. Recurrent expenditure will consume at least Sh1.25 trillion, with Sh637.64 billion going to development.

Minority Leader John Mbadi (Suba South), Mr Kimani Ichung'wah (Kikuyu) and Mr Peter Kaluma (Homa Bay Town) accused the Treasury of abandoning small and medium-sized enterprises, which have been allocated Sh3 billion.

Mr Mbadi said in spite of Covid-19, floods and desert locust invasions, "the budget is still business as usual and the sectors that have been consuming chunks of money continue to draw the same".

"I don't know if Treasury listens. Public debt is now an emergency," Mr Mbadi said and called for national dialogue on the loans.

Of the projected revenue collection of Sh1.62 trillion, some Sh904 billion will be used to service debt.

At least 51 per cent of the debt amount to be repaid will be interest. As at December, the country's public debt stood at Sh6.2 trillion.

Combining recurrent expenditure and the public debt brings the total to Sh2.1 trillion, which is above the Sh1.62 trillion in ordinary revenue (taxes) and appropriations-in-aid and grants the government projects to get in the next financial year.

Initially, the Treasury had projected that the Kenya Revenue Authority (KRA) would collect Sh1.64 trillion.

SH1.62 TRILLION

But the figure was revised to Sh1.62 trillion when the country began battling the pandemic.

It means the government will borrow more than Sh300 billion to finance recurrent and public debt expenditure.

The government will also be required to borrow Sh1.1 trillion to plug the deficit in the Sh2.7 trillion budget.

"What does that tell you? It is the reality and a blatant violation of the Public Finance Management (PFM) Act and the Constitution by the National Treasury. A time has come to stop this," Mr Mbadi said.

According to the Suba South MP, the country has reached a point where it is not able to service its debts.

"We need to be bold and tell the Executive that we should talk about our balance of payment position, our debt level, wage level and our capability as a nation to finance our operations," he said.

With the Covid-19 crisis taking a toll on the domestic and the world economy, it is expected that more people will lose jobs.

These are some of the issues the government has not addressed fully, according to Mr Ichung'wah.

He said the Sh53.7 billion allocated for post-coronavirus economic recovery is good but not enough.

"This is an ordinary budget prepared under extraordinary times," the Kikuyu MP said.

"The country's revenue has been battered by the pandemic. People can't go to work. It is time the government enters into debt renegotiations with lenders. There must be a balance between commercial and concessional loans."

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