By Kevin Rop—
In a sudden twist of events, the government has finally admitted that it is broke and not able to meet all of its financial obligations. This is a sudden change of tune after its recent position hat exuded confidence as it successfully presented its case at the London Stock Exchange for Eurobond II.
Treasury Cabinet Secretary, Henry Rotich made these revelations when he appeared before the Senate Committee on Finance and Budget. He had appeared to explain the government’s move to slash county government’s’ funding from 17 billion to 15 billion.
He told the Senate that the amount the government had put on the table is no longer feasible and that there was the need to get back to the discussion table with both Governors and Senators on this new direction.
Rotich further asked the state agencies and county governments to spend the money allocated to them frugally so as to enable public service delivery and minimize wastage. The CS also revealed that government would resort to domestic borrowing in an attempt to deal with the shortage of funds. This is an unpopular move, as the government will complete with the public in seeking funds from domestic lenders making it more expensive for smaller Banks to obtain credit from the big Banks.
Rotich blamed the current cash crunch on KRA’s failure to meet its annual collection target, leaving it with a deficit of Ksh 70 billion in the current financial cycle. He said they have deliberated with the taxman on ways to tighten the tax net at both customs and domestic revenue streams.
A combination of fast approaching international and domestic loan repayment deadlines coupled with the need to disburse to the counties has largely led to the crisis according to the Cabinet Secretary. An unstable political environment and last year’s two presidential elections did not help the situation either.
Meanwhile, Kenyans will be forced to brace for tougher times ahead as the cash crisis hits its peak and the government continues to borrow both domestically and externally. As national debt approaches 4.55 trillion, the country had been forced to dedicate more than half of its revenue to repaying debts meaning we should expect less money to be allocated to development and creating employment opportunities.