NAIROBI– The International Monetary Fund (IMF) has urged Kenya to reform its tax laws to shore up revenue in a bid to cut down on its public debt.
The IMF says Kenya’s debt, although sustainable, has been worsened by revenue shortfalls caused by various tax exemptions granted.
The IMF has also urged Kenya to introduce concrete measures to address the budget deficit which rose to 8.8 per cent of gross domestic product (GDP) in the 2016/17 fsical year, up from 7.3 per cent in 2015/2016.
Kenya’s public debt has continued to pile up, reaching an all-time high of 4.6 trillion shillings (about 45.46 billion US dollars) in December 2017, according to the National Treasury’s latest Quarterly Economic and Budgetary Review.
The debt is composed of 52 per cent foreign and 48 per cent domestic debt. The figure is expected to be higher now after the government secured 200 billion shillings through a second Eurobond issue last month.
In the current financial year, the Treasury plans to spend 660 billion shillings for payment of loans. This has caused alarm with the IMF expressing concern that Kenya’s debt is overheating unless urgent fiscal measures are instituted.
National Treasury Cabinet Secretary (Finance Minister) Henry Rotich last week said the government was working on the Finance Bill which would address some of the loopholes in Kenya’s tax administration and management policies.
The IMF says Kenya’s fiscal deficit has been worsened by various tax exemptions which have cut revenue.
The quarterly and economic and budgetary report shows that by the end of December 2017, total cumulative revenue, including Appropriations in Aid collected amounted to 710 billion shillings against a target of 778 billion shillings, representing a shortfall of close to 70 billion shillings.
The IMF says Kenya should also re-look the law on interest rates cap which has slowed the flow of credit to small and medium enterprises (SMEs) by 10 per cent.
Source: NAM NEWS NETWORK