Treasury CS Mbadi asserts that Kenya will continue borrowing despite its Sh11.2 trillion debt, with a debt-to-GDP ratio at 65.7%. The government is implementing measures for better financial management, while facing scrutiny over resource utilization and political disputes affecting county services. Revenue collection from KRA is under pressure, accentuating the fiscal challenges ahead.
Kenya’s National Treasury Cabinet Secretary, John Mbadi, has stated that the government will continue to borrow despite a staggering Sh11.2 trillion debt. As of June 2024, the debt-to-GDP ratio stands at 65.7%, significantly surpassing the 55% sustainability threshold. During a Senate Finance and Budget Committee meeting, Mbadi emphasized that borrowing is essential for the ongoing operations of the government.
In light of the increasing debt crisis, Senator Mohamed Faki questioned the utilization of loans, expressing concern over Kenya’s persistent indebtedness. Faki remarked, “Kenyans are wondering why we are still sinking deeper into debt while there are lingering questions about how these funds are being spent.” The fiscal situation is exacerbated by the aftermath of last year’s youth-led protests, which disrupted the government’s 2024 Finance Bill, leading to a revenue shortfall of Sh346 billion.
Mbadi acknowledged the current lack of trust in President William Ruto’s administration but reassured lawmakers that measures implementing effective use of public resources are underway. He stated, “We are working around the clock to ensure borrowed funds are utilized effectively because, eventually, these debts must be repaid.”
In terms of fiscal strategy, the government aims to raise Sh684.2 billion through domestic borrowing and Sh146.8 billion externally by June 2026. This decision is influenced by a decrease in funding from the International Monetary Fund (IMF). The Kenya Revenue Authority faces the challenge of collecting Sh1.07 trillion between March and June 2025, which requires an average monthly revenue significantly exceeding its current rate.
The Cabinet Secretary also raised concerns regarding a Sh42 billion loan secured shortly after the general election, questioning the urgency of the loan given the change in administration. He reported that a collaboration with the Auditor-General’s office is currently underway for developing a debt reduction strategy. Mbadi noted that ministries have been directed to prioritize spending to ensure effective resource utilization, underscoring the unspent Sh1.3 trillion currently allocated.
Issues regarding the allocation of Sh29.9 billion meant for devolved functions were also raised by Senator Boni Khalwale, to which Mbadi indicated he would respond after reviewing related reports. He called for political negotiation regarding the Road Maintenance Levy Fund dispute to prevent any disruptions in county services, asserting the necessity of resolving the issue to facilitate effective devolution.
Lastly, Mbadi expressed regret for missing two prior committee meetings, explaining the engagements with IMF officials and Cabinet obligations. He reaffirmed his respect for the Senate’s role in the budget-making process, emphasizing his experience as a former Member of Parliament.
In summary, despite a pressing debt situation of Sh11.2 trillion and a concerning debt-to-GDP ratio, the Kenyan government, represented by Treasury CS John Mbadi, will persist in its borrowing strategy to maintain operations. While questions regarding financial accountability and the effective use of borrowed funds remain, the government is implementing measures to reduce debt and ensure prudent resource management. The ongoing challenges with the Kenya Revenue Authority and political disputes underscore the complexities involved in managing the nation’s fiscal policies.
Original Source: eastleighvoice.co.ke
