Kenya allocated over half of collected tax revenues to service maturing debt in the first half of the current 2023/24 financial year, underscoring the increasing debt burden on taxpayers.

The latest expenditure disclosures from the National Treasury reveal that by the end of December 2023, Kenya’s debt repayment reached Sh600.73 billion, equivalent to 57 per cent of the Sh1.05 trillion tax revenues collected by the Kenya Revenue Authority (KRA). 

This means that for every Sh100 collected by the KRA during that period, Sh57 was directed towards settling maturing debts. Consequently, only Sh43, or 43 per cent, remained for crucial areas such as development projects, recurrent expenses (including salaries), and national emergencies.

Public debt servicing dominated the expenditure, claiming 89.9 per cent of the total exchequer issues from the Consolidated Fund. Following this, pension payments amounted to Sh59 billion, while Sh8.3 billion went towards settling salaries and allowances of public servants.

The huge usage of taxes on debt repayment occurred despite Kenya not even midway through the total Sh1.866 trillion debt treasury is expected to settle within the current budget cycle ending in June 2024, including bullet $2 billion (Sh300 billion) Eurobond repayment. 

In the disclosures, the exchequer has revised upwards this year’s total public debt obligation to Sh1.866 trillion from the initial estimate of Sh1.75 trillion. This is mainly on account of the depreciation of the shilling, which continues to increase the cost of paying off the foreign-denominated debt, especially from China.

The shilling has devalued significantly to exchange at a current rate of Sh160 per dollar. “Real exchange rate depreciation would help in engendering an external sector adjustment to ease the ongoing balance of payments pressures. Kenya’s public debt/GDP [Gross Domestic Product] ratio has gone up due to exchange rate depreciation,” the International Monetary Fund (IMF) says in the new country report.

China tops Kenya’s debt profile, having financed multibillion infrastructure projects during the previous regime, including the Standard Gauge Railway (SGR) that cost Sh508 billion, whose repayment continues to drain the exchequer.

Treasury has not issued the latest breakdown of the debt servicing, but repayments of Chinese loans through the Exim Bank of China had hit a record high of Sh72.07 billion by the end of September 2023.

Apart from the SGR, under the administration of ex-president Uhuru Kenyatta, Kenya largely attracted Chinese loans to construct power plants, roads, ports, and bridges in a bid to spur economic activities and create jobs.

The country has committed to the IMF that it will start implementing the recently published Medium Term Revenue Strategy (MTRS), which seeks to raise additional revenues through the introduction of new taxes and increase tax rates, signalling more pain to Kenyans. 

Mobilisation of revenues is mainly aimed at helping Kenya remain in a financially sound position to ensure easy debt repayment and meet other pressing fiscal obligations.

 “The Government has embarked on the implementation of the Medium-Term Revenue Strategy (MTRS) that will further strengthen tax revenue mobilization efforts to over 20.0 per cent of GDP over the Medium Term,” Treasury Cabinet Secretary Njuguna Ndung’u says in the Draft Budget Policy statement.

 
In the MTRS, a guideline for the budget-making process, the treasury has proposed the introduction of the carbon tax, motor vehicle circulation tax, review of excise duty on betting and gaming, introduction of VAT on education and insurance services, and surcharge tax.

While Kenya has been mostly locked out from the international capital markets over recent years, concessional lenders such as the IMF, the World Bank, and other multilateral lenders like the African Development Bank (AfDB) have been significant financiers to the government. By Herald Aloo, People Daily 

WILLIAM BURNS, DIRECTOR OF the United States Central Intelligence Agency (CIA), reportedly visited in secret at least two East African nations last week, amidst growing tensions and instability in the region. The trip was confirmed by both the Kenyan and Somali governments after Burns had already returned to the United States.

Reports indicate that Burns held a high-level meeting on Monday in Nairobi with Kenyan President William Ruto and Noordin Haji, the director of Kenya’s National Intelligence Service. The United States Ambassador to Kenya, Margaret Whitman, was also reportedly present at the meeting. Later in the week, on Thursday, the CIA director met with Somali President Hassan Sheikh Mohamud in Mogadishu before departing for the United States.

The specific details of the discussions during Burns’ visit remain undisclosed, leading to considerable speculation. Notably, it is highly unusual for senior American intelligence officials to personally visit sub-Saharan Africa, as the CIA typically communicates with the local governments through station chiefs or American ambassadors. Burns’ in-person visit suggests compelling reasons for the direct engagement.

According to some Kenyan news outlets, discussions encompassed the escalating instability in sub-Saharan Africa, which are stemming from various sources. These include the ongoing conflict in Sudan between government-aligned forces and militias loyal to the paramilitary Rapid Support Forces. Additionally, there is growing turmoil in the Democratic Republic of Congo after last month’s elections, resulting in the re-election of President Félix Tshisekedi. Disputes over the election’s fairness have led to military deployments to maintain peace amid rising tensions throughout the country.

Washington’s concerns also revolve around the continuing presence of al-Shabaab in East Africa. Operating in Somalia, al-Shabaab, an al-Qaeda-linked armed group, engages in conflict with the Somali government and is responsible for several terrorist attacks in Kenya. The United States currently has around 500 military advisors in Somalia, supporting the Somali government in its efforts against al-Shabaab.  By IAN ALLEN, Intel News

Senior Tories have warned Rishi Sunak against blaming the House of Lords if his Rwanda policy stalls as an ex-attorney general urged peers to back a motion that may complicate attempts to start deportation flights.

Tory ex-Cabinet minister Baroness Morgan warned that attempts to pitch the Lords against the “will of the people” could backfire, while former immigration minister Lord Kirkhope said he was “disappointed” that the Prime Minister turned his fire on the upper house last week.

It comes as Sir Tony Blair’s former attorney general, Lord Goldsmith, urged peers to back his cross-party motion that would delay the endorsement of the UK’s new treaty with Rwanda, which is designed to convince judges the country is safe after they ruled the policy unlawful.

The Lords will on Monday debate a motion from Lord Goldsmith’s International Agreements Committee that calls for the Government to present a 10-point plan to show Rwanda is safe for asylum seekers before the treaty can be ratified.

Lords sources have told i the motion appears likely to pass as Tories could abstain or even support it alongside crossbenchers, Labour and the Liberal Democrats.

It means ministers will either have to delay treaty ratification or ignore it and risk asylum seekers using the Lords’ concerns over the safety of Rwanda to bolster appeals against deportation.

Lord Goldsmith, the Labour peer who served Sir Tony during the Iraq war, told i: “It is a unanimous report by a cross-party committee so I’d hope that many peers would support it.”

He said he would decide whether to push it to a vote during the debate, depending on the level of support.

“We were given a job to do,” the Labour peer added.

“The Home Secretary in his foreword to the papers he put to Parliament said, because of the treaty you can now definitely say that Rwanda is safe.

“So that is the question we asked ourselves – can we answer that question?

“It may be but we can’t say on the basis of this [treaty] because there’s still so much to implement.”

The vote on Monday is likely to be the first skirmish between peers and the Government as the Lords prepares to consider Mr Sunak’s separate Safety of Rwanda Bill, which alongside the treaty is designed to revive the beleaguered deportation deal after it was stuck down by the Supreme Court. 

The Prime Minister last week attempted to pressure the Lords, which will begin debating the bill a week on Monday, to pass the laws “as quickly as possible” and not try to “frustrate the will of the people”.

But Baroness Morgan said the Bill would pass through the Lords as ultimately peers will back down if the Government opposes any amendments it makes.

She told the BBC’S Sunday with Laura Kuenssberg: “I would just say to No 10 that the last prime minister who used the will of the people language [Boris Johnson], it wasn’t a happy precedent.”

“If you put the House of Lords under too much pressure… if you allow them to talk, debate, scrutinise, you will get the result you want in No 10.”

Responding to Mr Sunak’s remarks during a No 10 press conference, fellow Tory Lord Kirkhope meanwhile told i: “I’m disappointed in this.

“Our job is to scrutinise legislation properly and I’m not convinced the Commons did scrutinise this very well, they seem to run their own agendas rather than looking at the actual legislation and seeing where the problems are.”

He added: “It’s either going to be the enemy of the people is the Lords or the enemy of the people is the judges.” By Arj Singh, The I