The government is facing a shortfall in the budget if its recent tax measures will not raise Sh133.1 billion.
The National Treasury in its 2023-24 financial year has set a Sh3.64 trillion budget, of which, Sh720.1 billion was expected to be financed through borrowing.
However, in its 2023 Medium-Term Debt Management Strategy, the exchequer has been limited to Sh587 billion in borrowing space, that is legally available at the moment unless parliament revises it up.
Kenya’s debt is projected to hit Sh9.41 trillion by end of June 2023 against the Sh10 trillion debt ceiling, meaning that as it stands, the borrowing headroom is slimmer than the targets set.
Should parliament fail to increase the ceiling, Treasury could be forced to slash the proposed budget by the Sh133 billion or bet on the increased taxes to meet the deficit.
Already, Treasury has initiated the process of amending the debt ceiling from the numerical number of Sh10 trillion to a debt anchor of 55 per cent of debt to GDP in present value terms.
Currently, the present value of debt as a percentage of GDP is at 60 percent.
National Treasury Principal Secretary Daniel Kiptoo in his submissions to the Public Debt and Privatisation Committee said a decision to stick to this ceiling, it means all the programmes will be affected to the tune of Sh133 billion.
“The ceiling is not the best capacity for this country. If by June we don’t do any adjustments, we will only have a headroom of Sh587 billion to borrow,” said the PS.
This will be the third attempt to raise the ceiling in a span of six years.
The country breached its Sh9 trillion debt ceiling in 2022, but this was temporarily revised upwards to Sh10 trillion last June, to allow the then government to finance the 2022-23 budget deficit.
Already, the government is eyeing $1.0 billion (Sh128.9 billion) budgetary support from the World Bank Group, expected by June 30.
In the current setting, the public debt is projected to be Sh9.41 trillion by June, where multilateral debt accounts for 47 per cent of the debt, equivalent to Sh2.21 trillion.
Bilateral debts account for 26 per cent (Sh1.21 trillion) out of which, China accounts for 67 per cent and commercial debts at 27 per cent (Sh1.25 trillion), with the Eurobond accounting for 19 percent.
