Kenya’s domestic debt has reached alarming levels, with a 5.8 percent increase in public debt during the last fiscal year, raising concerns about the country’s economic stability and the potential impact on its citizens. The Central Bank of Kenya (CBK) reports that new borrowings hit Sh577 billion, pushing the total domestic debt stock to a staggering Sh5.41 trillion by the end of June 2024.
This surge in borrowing comes despite the government’s implementation of aggressive taxation measures aimed at narrowing the fiscal deficit. The Finance Act of 2023 introduced several new taxes, including a controversial 1.5 percent housing levy and increased VAT on fuel, which have already placed a significant burden on Kenyan citizens.
Economic analysts warn that the continued reliance on domestic borrowing could have severe consequences for the average Kenyan. Higher government borrowing typically leads to increased interest rates, making loans more expensive for businesses and individuals alike. This could potentially slow economic growth and job creation, further straining an already challenging economic environment.
The Kenya Revenue Authority (KRA) fell short of its collection target by Sh267 billion, despite implementing new taxation measures. This shortfall, coupled with increased borrowing, suggests that the government’s fiscal strategies may not be achieving their intended results.
Critics argue that the International Monetary Fund (IMF) has set unrealistic tax targets for Kenya as part of its budgetary support program, potentially pushing the government towards excessive borrowing to meet its financial obligations.
The recent public outcry that forced President Ruto to withdraw the Finance Bill 2024 highlights the growing frustration among Kenyans with increased taxation and economic hardships. As the government continues to grapple with its fiscal challenges, concerns are mounting about the long-term sustainability of Kenya’s economic policies and their impact on the well-being of its citizens.
Economists are calling for a careful re-evaluation of the country’s fiscal policies, emphasizing the need for sustainable economic growth strategies that don’t rely heavily on domestic borrowing or burdensome taxation. As Kenya navigates these financial challenges, the welfare of its citizens and the stability of its economy hang in the balance.
