The National Treasury is bracing itself for the upcoming maturing loan obligations in 2019 through the implementation of the new taxes under the Finance Bill 2018. That could mean that pressure on Kenyans is going to increase as the Treasury works to meet these obligations. Consequently, the expected relief from taxes such as the fuel levy might not happen.
In its 2018 budget, the Treasury said it was focusing on reducing the current public debt and cutting down on the budget deficit. The Treasury’s expansion of the tax base has been criticised as being “a quick fix” to the current budget and debt needs.
“Taxation is supposed to be applied in a responsible manner, in the sense that we either widen the tax base or focus on areas with a lot of spillage and caps. I thought we would look at the customs duty that has all along been exempted, which does not benefit the common mwananchi,” the regional head of treasury Barclays Bank Africa Group Limited Antony Mulisa said.
Taxes are bound to rise higher still ahead of the repayment of the first tranche of Euro bond 1 amounting to $750 million which will mature in June 2019 and the repayment of the first instalment of the standard gauge railway (SGR) commercial loan of $1.633 billion which starts next year.
The standard gauge railway is being financed with a 15-year commercial loan and a 21-year concessional loan of $1.6 billion whose payment will begin in 2021. On the other hand, Eurobond 1 was meant to fund infrastructural projects and to repay a loan of $600 million incurred in 2011/2012.
Kenya’s Debt Profile – (Compiled by Ishmael Osolo, an independent financial analyst)
Kenya’s debt profile features a two-year syndicated loan of $750 million from Citi Bank, Standard Bank, SA and Standard Chartered Bank (Sep 2015-April 2018) meant to finance the budget and Eurobond 2 of $2 billion meant “to pay part of the loans above syndicate loan $1.75 billion.” Other loans include:
- $600 million from China Development Bank Corp running from June 2016-2023
- $250 million East and South Africa Trade Development Bank running from Dec 2016-2018
- $300 million East and South Africa Trade Development Bank running from March 2017-2022
- $200 million East and South Africa Trade Development Bank running from March 2017-2027
- $750 million from East and South Africa Trade Development Bank running from Oct 2017-2027 to pay 2015 syndicated loan
Kenya’s public debt stood at over Sh5 trillion as at June 2018 which is 58 per cent of the GDP.
