Treasury's Plan to Reduce Kenya’s Debt Burden in 2023 Budget Policy

Treasury CS Njuguna Ndung'u chairs a bilateral cooperation meeting Czech republic and Kenya at the Treasury Building, Nairobi county on Wednesday, January 11, 2023.
Treasury CS Njuguna Ndung'u chairs a bilateral cooperation meeting Czech Republic and Kenya at the Treasury Building, Nairobi county on Wednesday, January 11, 2023.

The government, through the draft 2023 Budget Policy Statement released on Wednesday, January 18, announced a raft of measures aimed at turning around the economic situation. 

According to the draft policy statement by Treasury Cabinet(CS) Secretary Njuguna Ndungu, the government admitted that Kenya had been largely affected by the economic slowdown at the global level amid a projected recession. 

Debt servicing and payment arrears, as per the policy statement, proved to be major obstacles to the growth of Kenya's economy and revival following the Covid-19 disruptions.

A file iumage of the National Treasury
The National Treasury offices at Harambee Avenue, Nairobi

Departing from the borrowing culture that characterised previous governments, the CS  announced plans to scale up revenue collection in a bid to slow down on borrowing and eventually turn around the economic situation. 

"The agenda is geared towards an economic turnaround and inclusive growth and aims to increase investments in at least five sectors envisaged to have the largest impact and linkages to the economy as well as on household welfare,' read the statement in part. 

Among the measures announced in the report include the maximization of the value-added tax (VAT) collected in the coming financial year. 

To execute the goal, the government is looking to leverage the electronic Tax Invoice Management System (eTIMS) in its efforts geared towards reducing the gap between the projected collection and the revenue collected through VAT.

Corporate companies and businesses will be in the spotlight as the state seeks to reduce the Corporate Income Tax (CIT) gap by narrowing the gap between projected revenue and the actual revenue collected by the tax man. 

Also on the radar is mobile money transactions, as the government announced plans to integrate the tax system with mobile money transfer systems in the country. If actualized, the integration would to closer monitoring of activities on the mobile money platforms henceforth. 

"Government will implement the Integration of KRA tax system with the Telecommunication companies (Telcos)," the draft policy statement continued.  

In addition, the government announced plans to increase leverage on rental income tax measures mapping rental properties to reduce evasion among landlords. 

To achieve these goals, the government will work to enhance the capacity of the Kenya Revenue Authority (KRA) through training and additional staffing. The state also promised to facilitate KRA in the acquisition of modern technology.

If successful, the draft policy statement projected a potential rise of revenue collected to Ksh3 trillion for the 2023/24 financial year, and eventually Ksh4 trillion over the medium term.   

Kenya Revenue Authority
Kenya Revenue Authority building at Times Towers