Low revenues, high interest rates leave Treasury high and dry

Low revenue collection, high interest rates and an unfavourable exchange rate are the reasons the treasury has no money, MPs were told Thursday.

The Kenya Revenue Authority collected Sh181.2 billion in the first two months of the current financial year, which was below the expected average for the period, the Parliamentary Budget Office said.

All revenue receipts are below average, said the team of economic and budget experts employed by Parliament to aise MPs, and raise doubts as to whether the government will meet tax revenue targets for the year.

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Domestic borrowing is also below the target because of the high interest rates while the depreciation of the shilling against the dollar weigh heavily on the government’s plans for meeting the revenue target.

The government has delayed to disburse money to counties, the Higher Educations Loans Board and turned down teachers’ clamour for a pay increase.

Afraid to borrow

The high interest rates for domestic borrowing mean the government is afraid to borrow too much money from the market.

PBO’s explanation suggested that the combination of low revenue collections, the pressure the shilling has been under in the foreign exchange market and the inability to borrow locally could explain the cash crunch the government is facing.

Members of the committee put the situation down to the large size of the government as a result of the institutions created under the Constitution enacted five years ago.

“We can’t afford the car we have bought,” said Dagoretti South MP Dennis Waweru. “We also need to go back and ask, ‘Do we go for a Range Rover or a Toyota?'”

Treasury Principal Secretary Dr Kamau Thugge was set to meet the committee to give the government’s explanation of the situation but had to attend another meeting.

The committee will meet him next Tuesday.