Kenyan Begin to Feel the Impact of Servicing External Debts

Kenya spent over half of its tax revenues to service external debts in the first quarter of this fiscal year.

Kenya paid a total of Ksh 347.2 billion to service its debt for the three months between July and September, according to the figures provided by the Finance Minister, Professor Njuguna Ndung’u.

This is compared to the same period in 2022 when Kenya used a total of Ksh 236 billion to service its debts.

In total, Kenya used 67% of its tax collections to service debts, given that the Kenya Revenue Authority (KRA) collected a total of Ksh 514.2 billion.

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Economic analysts view this trend as indicative of Kenyan citizens beginning to feel the economic burden of servicing international debts.

“If it has reached a point where we are spending more than half of our collections to pay taxes, then that indicates that Kenyans may begin to feel the severity of international debt payments,” said Mr. Tony Watima, an economic analyst.

Kenya’s debt includes Eurobond loans, loans from China, and others from various financial institutions within the country. Analysts say that the reason Kenya is using a substantial amount of funds to service its debts is that some of its loan repayment deadlines have arrived.

In the last fiscal year (2022/2023), Kenya used a total of Ksh 1.16 trillion to service its debts, compared to this year, where it plans to use Ksh 1.75 trillion to service its debt.

“At the moment, it is clear that Kenya’s debt has reached an alarming level. Although Kenya is doing its best to service these debts, there is a high possibility that its citizens may start feeling the effects of these debts, due to the depreciation of the Kenyan Shilling against foreign currencies and the economic downturn in many countries worldwide,” said Mr. Watima.

In a move that illustrates the challenges facing the government in servicing its debts, Kenya spent Ksh 329.2 billion on government recurrent expenditure compared to Ksh 347.2 billion used to service the national debt between July and September.