In Summary
  • Mr Rotich has prepared a Sh3 trillion spending plan for the next financial year starting July 1, a growth of about Sh400 billion from the current year’s Sh2.6 trillion.
  • Economists say the country has nearly exhausted its borrowing headroom, with taxpayers already heavily burdened.

  • A huge share of State revenue will go to debt repayment and financing of recurrent expenses.

It’s a delicate balancing act for Treasury Secretary Henry Rotich as he presents a budget which is expected to be largely financed by tax increases and debt, with economists saying this is unjustified in light of deeply entrenched corruption.

Mr Rotich has prepared a Sh3 trillion spending plan for the next financial year starting July 1, a growth of about Sh400 billion from the current year’s Sh2.6 trillion closing end of this month.

Economists say the country has nearly exhausted its borrowing headroom, with taxpayers already heavily burdened. A huge share of State revenue will go to debt repayment and financing of recurrent expenses. Currently, public debt stands at over half the country’s gross domestic product (GDP).

FLASHING AMBER

“Debt to GDP is now flashing amber,” said Mr Aly-Khan Satchu, a position shared by Central Bank of Kenya Governor Patrick Njoroge and multilateral lenders like the International Monetary Fund. Kenya’s public debt has crossed the Sh5 trillion mark for the first time following acceleration of external debt. The amount owed externally stood at Sh2.563 trillion at the end of February, according to data from the Central Bank of Kenya. Domestic debt stood at Sh2.448 trillion at the end of last month.

“Multilateral debt has been going down since 2014, but bilateral and commercial debt have gone up. Multilateral debt being cheaper should not be falling, while commercial debt, being quite expensive, should not be rising. We need to manage that,” said Mr John Mutua, a programmes officer at the Institute of Economic Affairs.

MULTILATERAL DEBT

The rising debt implies there will be increased spending on its servicing, which in turn pushes up the recurrent expenditure part of the total government budget.

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