This archive report was first published on 25 August 2021.
Kenya's National Treasury is facing a daunting task in balancing the country's huge debt burden, which has left the government with limited room for flexibility in its budget allocation.
According to a report by the Institute of Economic Affairs and the National Democratic Institute, the debt, which stands at Sh7.7 trillion, is largely due to the late disbursement of budgeted funds for development and operations.
The report, titled Analysis of National Government Budget Implementation Report August 2021, notes that while the government is obligated to pay its lenders, Treasury is left balancing each shilling collected with debt and recurrent expenditure being prioritised against development.
As a result, the growth of the country's gross domestic product (GDP) does not reflect on the revenue collected, with the debt service to revenue and grants ratio for 2021 standing at 68 per cent instead of 30 per cent.
This means for every Sh100 collected as revenue by the government, Sh68 goes to repaying debt, leaving only Sh32 for ministries, departments, parastatals, and legacy standalone projects like Universal Health Coverage.
The situation has been worsened by the government's heavy borrowing from external commercial lenders, which has left the government with almost no room for flexibility as debt is one of the mandatory payments.
“Given the exchange rate which has worsened, we have to purchase more dollars to repay,” said IEA Assistant Programme Officer Noah Wamalwa who presented the report.
The debt crisis is affecting how ministries run, with the report listing health as one of the most affected sectors. The sector received just 23 per cent of allocated funds from the exchequer by March 31, 2021, yet this figure should be at least 75 per cent as the financial year nears the end.
