The National Treasury recently released the fiscal performance report for the fifth month of the financial year (FY) 2023/24.
The report underscores a noteworthy development in Kenya’s economic landscape, specifically in the realm of debt service to revenue ratios. As of the end of November, this ratio has ameliorated to 58.6%, signifying that the country allocated KES 517.1 billion out of its KES 882.3 billion revenue collection to service its public debt, presently standing at KES 10.7 trillion.
This improvement is significant compared to the initial ratio of 101.4% recorded in the first month of FY 2023/24, concluding in July 2023. The positive shift is attributed to augmented revenue collection efforts.
The government successfully garnered KES 882.3 billion by November, constituting 34.2% of the revised budget estimates of KES 2,576.8 billion for the entire fiscal year. This achievement represents 82.2% of the prorated revenue target of KES 1,073.6 billion for the initial five months.
Tax revenues contributed significantly, amounting to KES 847.3 billion, equivalent to 34.0% of the revised tax revenue estimates of KES 2,495.8 billion and 81.5% of the prorated tax revenue target of KES 1,039.9 billion. Total government expenditure reached KES 1,183.2 billion, encompassing 27.6% of the revised expenditure estimates of KES 4,281.6 billion and 66.3% of the prorated expenditure target of KES 1,784.0 billion.
Within this expenditure, net disbursements to recurrent expenditures totaled KES 444.1 billion, representing 32.7% of the revised recurrent expenditure estimates of KES 1,360.1 billion and 78.4% of the prorated recurrent expenditure target of KES 566.7 billion.
With the debt service to revenue ratio at 58.6%, the country exceeds the International Monetary Fund’s recommended threshold of 30.0% by 28.6%, underscoring the strain that public debt servicing imposes on national expenditures. This high debt servicing cost constrains fiscal space for crucial public investments, social programs, and government functions essential for the country’s long-term well-being.
A heightened debt-to-revenue ratio elevates the country’s credit risk, augmenting the cost of acquiring additional borrowing as investors demand higher yields. The fiscal performance in November 2023 demonstrates a consistent revenue collection and expenditure pattern, with a substantial portion of revenue allocated to debt servicing.
The government’s adept management of its finances will be pivotal in the upcoming months, with opportunities for enhancement in revenue mobilization, expenditure rationalization, and debt management.
