This archive report was first published on 15 August 2019.
On March 8, 2018, Treasury Cabinet Secretary Henry Rotich made a shocking revelation to the Senate Committee on Finance and Budget: the government is broke and unable to meet all of its financial obligations.
Rotich's admission came after the government's recent success in presenting its case at the London Stock Exchange for Eurobond II, which had exuded confidence in the government's financial situation.
According to Rotich, the government had allocated Ksh 17 billion to county governments, but this amount is no longer feasible. He called for a return to the discussion table with both Governors and Senators to find a new direction.
Rotich also asked state agencies and county governments to spend their allocated funds frugally to minimize wastage and enable public service delivery. The government plans to resort to domestic borrowing to deal with the shortage of funds, which will make it more expensive for smaller banks to obtain credit from big banks.
The current cash crunch is attributed to KRA's failure to meet its annual collection target, leaving a deficit of Ksh 70 billion in the current financial cycle. Rotich said they have deliberated with the taxman on ways to tighten the tax net at both customs and domestic revenue streams.
A combination of fast-approaching international and domestic loan repayment deadlines, coupled with the need to disburse to the counties, has largely led to the crisis. An unstable political environment and last year's two presidential elections did not help the situation either.
As national debt approaches 4.55 trillion, the country has been forced to dedicate more than half of its revenue to repaying debts, meaning less money will be allocated to development and creating employment opportunities.
