Financing debt with overdrafts hurting Kenyans

Monday, December 6th, 2021 15:36 |
Central Bank of Kenya Photo/Courtesy

The government has been urged to set aside a sinking fund to service ballooning public debt lest the country risks using borrowed funds to fund the debt.

A report by National Taxpayers Association (NTA) says lack of a sinking fund to repay foreign debt is exposing Kenyans to high risks, as funds meant for essential ser- vices are used to pay the loans.

NTA National Coordinator Irene Otieno said Parliament needs to
assess and enhance debt management policies.

“Given the constrained fi - cal space, public debt appears to impose an undue burden on economy. Debt was 41 per cent of the total revenues in 2020/21. This reduces the ability of the country to its budget, and because it is unclear just how much of the incurred debt is going into the budget, there is a risk that Kenya is using borrowed funds in the debt,” said Otieno.

Spending more than 60 per cent of domestic revenue on debt servicing is not sustainable and urged the government to consider debt relief, which will decrease the rate of borrowing translating to lower debt in the short and long run.

Speaking during the release of the report which explored debt burden faced, the Controller of Budget Margaret Nyakango also faulted the use of borrowed funds on recurrent expenditure.

“Public debt should be used in development projects. We have been facilitating our loans with overdrafts, a strategy that is hurting Kenyans,” Nyakango said.

The lobby is asking the government is to reduce its borrowing and focus on repaying the current

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