Treasury Plans to Raise Ksh346 Billion Through Finance Bill to Alleviate Debt Distress

Treasury CS Njuguna Ndung'u addresses the media during the launch of the 2022 KDHS report by KNBS held at KICC, Nairobi on July 3, 2023.
Treasury CS Njuguna Ndung'u addresses the media during the launch of the 2022 KDHS report by KNBS held at KICC, Nairobi on July 3, 2023.

The National Treasury has come out to defend the proposed tax measures in the Finance bill stating that the decision to introduce new taxes was informed by the country's huge debt. 

Treasury Principal Secretary Chris Kiptoo, while appearing before the Finance and Planning committee on Tuesday, June 11 noted the country was grappling with a debt of Ksh11 trillion.

According to him, the new tax measures would immensely help Kenya manage its bulging debt and help the country reduce the debt stock.

He noted that the Finance bill sought to raise Ksh346 billion which will be used to partially fund the 2024/2025 budget which currently awaits parliament approval.

National Treasury
The National Treasury building in Nairobi County.
National Treasury

Kiptoo further warned that the country had reached its optimum and that there was no room for more debt.

"The huge public debt informs the tax measures we are taking, we feel we need to raise our revenues rather than relying on debt to finance our budget," Kiptoo argued.

“Considering the need to mobilize sufficient revenue to stabilize our debt, I urge the Committee Members to favourably consider all the proposed provisions in the Finance Bill, 2024," he added.

While appraising the committee, Kiptoo noted the public debt had significantly increased and represented 70 per cent of the Gross Domestic Product (GDP), which is up from Ksh46 billion in 2010.

The PS noted that out of the Ksh11.2 trillion in public debt, 55 per cent was external debt while domestic debt stood at 45 per cent.

"We are undertaking tax policy reforms guided by findings of studies to enhance the development of a progressive tax system that optimizes tax revenue collection, and expands the tax base," the PS noted. 

Kiptoo's sentiments come barely a day after the International Monetary Fund (IMF) reached a staff-level agreement with the National Treasury for the disbursement of ksh126 billion ($976 million).

While announcing the disbursement, the IMF urged Kenya to adjust its 2024/25 budget to include more revenue-raising measures.

According to the IMF, the fiscal measures outlined in the Finance bill could help Kenya alleviate its debts which have plunged the country into a debt crisis.

"Authorities have taken decisive steps towards fiscal consolidation by introducing several measures in the context of the draft 2024/25 Budget and the 2024 Finance Bill," the multilateral lender stated.

International Monetary Fund office.
The International Monetary Fund (IMF) offices in Washington, US.