Government mulls over setting public debt ceiling

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Kenya will soon have a fixed national debt ceiling which will ensure that the government operates within set limits that is sustainable and does not exert unmanageable pressure on the economy.

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Acting Treasury Cabinet Secretary (CS) Ukur Yatani said that in the past we have been expressing our debt in terms of percentage ratio to the Gross Domestic Product (GDP) but added they now want to be more transparent to the Kenyan people because GDP is a moving target hence when the GDP grows next year, the loan ceiling will grow proportionally.

“We are working towards a fixed target whether six trillion, seven trillion or nine trillion which will help us know that we are slowing the pace in catching up with the target ahead of us. This will help the government, business community and Kenyans in general to know the actual debt ceiling in the country,” he explained.

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Yatani explained that the country finances operations through revenue but clarified that additional projects like major infrastructure are funded through borrowing from multiple sources like commercial loans, concessional loans by multilateral agencies, the World Bank, African Development Bank among others.

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Speaking on Monday during the launch of the taxpayer’s month, Yatani said that so far the debt level has been quite sustainable and added from independence to date Kenya has never defaulted on a single debt or any payment both local and foreign.

With the country’s debt estimated at Sh6 trillion, Yatani said that our debt levels are sustainable but added that Treasury wants to be more proactive by retiring all commercial loans currently being paid at an interest rate of between eight and nine percent as well as loans which are being paid over a short period of time and are likely to put pressure on the revenue collected in the country.

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“We want to retire these and make sure we remain with the multilateral loans which give us a grace period of about 10 years before we start repaying and we pay at a minimal interest rate and this is not going to strain us.

We want to remain with loans which we can afford without being under pressure to be making regular payments in huge amounts,” explained Yatani.

According to Yatani, the plan will also improve the relationship with development partners since they will know the State’s limit which will help them make decisions based on disclosure.

He added that having a target does not imply Treasury will borrow that amount immediately and further said they can even take 10 years to borrow that target.

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“We need to understand that every year we finance our operations through a budget and you cannot spend any amount unless it is appropriated by parliament, we will only borrow the shortfall in the budgets as compared to the revenue collected,” said Yatani.

KRA board chairman Francis Muthaura said that KRA collects taxes in accordance with the law and added that the law of taxation was developed out of very consultative engagements so that the tax burden is shared evenly.

Muthaura said that they strive to ensure that taxes are not collected from people who cannot pay and are collected according to the taxpayer’s ability.

According to Muthaura KRA has come up with an alternative dispute resolution mechanism which is absolutely free of charge and in the year 2018/19, a total of 207 disputes with total revenue amounting to Sh8 billion were resolved.

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