By Nsunjo Erica
Kenya borrowed 374 billion shillings in two months, July and August pushing the country’s total public debt to more than 7 trillion shillings by the end of August 2020.
According to data from the Central Bank Of Kenya (CBK), nearly 60 percent of the borrowed cash between July and August came from the domestic market, where Treasury got Sh224 billion.
The economy has been bitterly affected by the outbreak of the COVID-19 pandemic that froze businesses which has disrupted economic activities and reduced Revenues and pushed the Treasury into borrowing.
Following the disruptions in the business sector, the Treasury was forced to revise downwards its earnings for the current financial year from Sh1.63 trillion announced in June to Sh1.52 trillion.
The CBK indicates that although more borrowing was from the domestic market, the share of local loans still trails that of external debt which stood at Sh3.66 trillion in the period under review.
External debt rose by Sh151 billion between July and August. In the last few months, the Government has received cheap loans from multilateral institutions, including the World Bank, the International Monetary Fund (IMF), and the African Development Bank.
Domestic debt from banks, insurance firms, pension funds, and overdrafts from CBK in the financial year (FY) 2020/21, stood at Sh3.4 trillion by end of August.
Excluding grants, Treasury expects to borrow close to Sh1 trillion in the financial year ending June 2021. With this money, the Government can disburse a monthly stipend of 5, 080 shillings to 16.4 million poor Kenyans for a year, money that would be more than adequate for their dietary needs.
The money that Treasury expects to borrow from both local and foreign investors in 12 months from July, technically known as fiscal deficit or budget hole, had initially been estimated at Sh898 billion in the budget statement read by Treasury Cabinet Secretary Ukur Yatani in June.
Including grants, the treasury expects to get loans worth Sh951 billion, a rise from the earlier estimate of Sh841 billion.
This deficit, the shortfall between expected tax revenue and expenditure, will be plugged through both local and foreign borrowing of Sh554 billion and Sh397 billion, respectively.
In the draft Budget Review and Outlook Paper (BROP), 2020, the budget hole was revised upwards due to the poor business environment. The woes saw Kenya Revenue Authority (KRA) collect fewer taxes in the FY2019/20, particularly in the fourth quarter.
Previously according to the recent report released by COB, Kenya borrowed an average of 2.43 billion shillings every day last year and paid commitment fees on loans yet to be disbursed or planned for, pushing total debt to Sh6.69 trillion as of June 30.
According to the National Treasury, before the outbreak of COVID-19, it had started implementing belt-tightening measures aimed at reducing the debt levels, which have been careening to dangerous levels. However, the pandemic caused more disruptions.