NTA Calls on the Government to review Loan Obligation

Lack of a sinking fund fund to repay foreign debts is exposing Kenyans to high taxes as funds meant for essential services are diverted to servicing Public loans according to NTA (The National Taxpayers Association)

According to Irene Otieno the NTA National Coordinator,  Parliament should  assess and fastrack the implementation of debt management policies. 

“Given the constrained fiscal space, Kenya’s debt appears to impose an undue burden. Debt financing in the same year was 41 percent of the total revenues in 2020/21. This reduces the ability of the country to finance its budget – and because it is unclear just how much of the incurred debt is going into the budget, there is a risk that Kenya is using borrowed funds to finance its debt,” said Ms Otieno.

She adds that Spending over 60 per cent of domestic revenue on debt servicing is not sustainable. Calling on the government to consider debt relief which will decrease the rate of borrowing translating to lower debt financing in the short and long run.

Speaking during the release of the study that explored the harm caused by the debt burden faced by the country, the Controller of Budget Margaret Nyakango  faulted the use of borrowed funds for recurrent expenditure.

“Public debt should be used in development projects. We have been financing our loans with overdrafts a strategy that is hurting Kenyans” said Nyakango.

According to the study by the Tax Payers Association, Given the constrained fiscal space, Kenya’s debt appears to impose an undue tax burden.

“As of Sep 2020, Kenya’s total public debt was Kshs 7.1 T. The country also moved from a percentage to GDP debt ceiling of  50% to an absolute figure of (Kshs 9 trillion) in October 2019,” reads the report in part.

Among the recommendations the lobby is now asking the government is to reduce its borrowing and set its focus in repaying the current loans.
“The government should encourage adequate discussion forums while making decisions on amending key legal frameworks that have an impact on public debt. This includes according more Autonomy to The Public Debt Management Office (PDMO) to set debt limits,” added Ms Otieno.

In the 2019/20 financial year Kenya’s combined health expenditure at the national and county level was 10.2 percent of the overall combined expenditures.

Debt financing made during the year amounted to 30.9 percent of the combined overall expenditures.

The report further reveals that in 2020/21 financial year  41% of total revenues generated are going to debt financing.

Kenya became a Middle-Income country in 2014 hence had to go to the open market to source for loans( Commercial Loans)

The government should borrow smart by pursuing Low-Cost Loans.

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