Kenya debt servicing absorbs 71% of government revenue, Controller of Budget warns

• Kenya's public debt has reached Sh12.82 trillion, with loan repayments consuming 71% of all government revenue.
• The country's debt portfolio is comprised of approximately 60% domestic debt and 40% external debt.
• Nyakang'o advocated for gradual fiscal consolidation to narrow the financing gap between revenue and expenditure.

The Controller of Budget, Margaret Nyakang'o, has sounded the alarm on Kenya's public debt, which has reached Sh12.82 trillion. This staggering figure is a stark reminder of the country's borrowing habits and its impact on government revenue. With loan repayments consuming 71% of all government revenue, there is limited room for funding essential services and development projects. The situation is further complicated by the fact that Kenya's debt portfolio is comprised of approximately 60% domestic debt and 40% external debt. This has led to a vicious cycle of borrowing, where the country is forced to take on more debt to service existing loans.

Nyakang'o's remarks before the National Assembly's Public Petitions Committee highlighted the dire consequences of Kenya's mounting debt burden. With 71% of revenues going towards loan repayment, there is only 29% left for recurrent and development spending. This has severe implications for the government's ability to finance essential services without resorting to additional borrowing. The Controller of Budget emphasized that calls for the government to stop borrowing altogether are understandable but difficult to achieve under the current fiscal realities.

Nyakang'o advocated for gradual fiscal consolidation, urging the government to narrow its financing gap by raising revenue while cutting expenditure. This approach would involve reducing spending while increasing revenue, making the financing gap smaller over time. The Controller of Budget also emphasized the need for tighter controls on public borrowing and stricter adherence to the Public Finance Management Act. Her office has already sought an explanation from the National Treasury over expenditure on International Monetary Fund (IMF) on-lent loans.

Lawyers and compliance officers should watch for the potential impact of Kenya's mounting debt burden on government revenue, which may lead to reduced funding for essential services and increased borrowing. They should also be aware of the Controller of Budget's efforts to intensify scrutiny of pending bills and prevent diversion of public funds.

Source: Original reporting via AllAfrica Kenya