Treasury Refutes Claims of Government Insolvency: Over KSh 260B Collected in March

by | Apr 20, 2023 | Finance, News | 0 comments

Contrary to Deputy President Rigathi Gachagua’s assertion that the government was insolvent and unable to pay salaries due to burdensome debt servicing, recent Treasury data demonstrates a more promising financial outlook. Gachagua had cited that a significant portion of government loans were maturing in March 2023, with repayments accounting for 60% of revenue. However, the National Treasury data reveals that the government collected KSh 260.9 billion in March, while debt repayment costs reached KSh 121.3 billion.

According to the data, the government has the capacity to service maturing debt and compensate civil servants. Treasury Cabinet Secretary Njuguna Ndung’u has previously discussed this financial capability.

The allegations of government struggle arose in the context of delayed March 2023 salaries for civil servants, prompting Gachagua to declare the government’s financial woes. Despite his assertion that 60% of tax revenue was directed towards debt repayment, the Treasury report indicated a collection of KSh 260.9 billion, a significant increase from the KSh 176.7 billion collected in February 2023.

Debt repayment in March stood at KSh 121.3 billion, up from KSh 66.7 billion in February, but lower than the KSh 123.53 billion reported in January 2023. The growth in revenue indicates that the government could cover additional debt bills and other expenses for the month. The Kenya Revenue Authority (KRA) achieved 95.1% of its original target and 93.4% in March.

Treasury officials have maintained that the government has met its core mandates for the month. “The government is not broke because the government has so far been able to pay debt obligations when they fall due. In other words, we have not defaulted on debt obligations,” a Treasury official told Business Daily.

Revenue growth of 15.48% outpaced the 13.18% increase in expenditure, which totaled KSh 269.63 billion. The official cited a “temporary liquidity shortage” as the government’s primary challenge, resulting from delayed receipt of expected funds. These funds are now scheduled to be disbursed in May and June 2023.

Gachagua acknowledged on April 19 that all salaries had been paid after sufficient revenue was collected. “Last month we had a slight challenge, a delay in payment of salaries… but all salaries have now been paid. We are paying salaries by collecting revenues,” he said, as quoted by Citizen TV. Gachagua also assured county governments of an imminent disbursement from the exchequer.

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