Experts warn of impending Treasury’s unspent billions
Lewis Njoka @LewisNjok
Kenya could cross into the next financial year with billions in unspent cash after it emerged that National Treasury is expecting to receive over Sh200 billion in loans before the 2020/21 fiscal year ends in June.
At the same time the country will be seeking to absorb the June tax receipts, usually the largest collection compared to the other months in a year.
With about a month to go to the end of the current financial year on June 30, analysts are worried that there might not be enough time to absorb the monies raised.
According to Central Bank of Kenya Governor, Patrick Njoroge, Treasury expects to receive $750 million (Sh80.6 billion) from the World Bank, $410 million (Sh44.1 billion) from International Monetary Fund (IMF), and another Sh13.8 billion from the Africa Development Bank.
Additionally, Treasury is looking to raise Sh124 billion from a Eurobond before end of the current financial year.
“We expect that we will be receiving some official capital flows, concessional financing in particular from the World Bank,” Njoroge said yesterday.
There is a loan, the so called DPO (Development Policy Operation), of $750 million that is expected in the next couple of weeks, he added.
Complete the review
“We also expect that the IMF will complete the review of the program sometime in June and that will lead to a disbursement of something to an equivalent of $410 million,” said Njoroge.
Also expected to received, he added, are some amounts from African Development Bank also supporting all the working that is going on in Covid-19 response and recovery post-Covid.
Njoroge said the money will be used to support budget as well as other external resources, such as foreign exchange reserves, the country needs.
“The bottomline is, we expect the current account deficit to close at about 5.2 per cent of GDP in 2021. We also expect an increased level of reserves from the flows that I mentioned,” he said.
Churchill Ogutu, the head of research at Genghis Capital, questioned the timing of the disbursement, saying it could result in low absorption rates, numbers that could be used in future to justify the notion that the country’s budget is too ambitious.
According to Ogutu the country will be required to absorb roughly Sh350 billion in a span of one month considering that the June tax receipts are usually higher than other months of the year.
“It doesn’t make sense that we are having so much money coming towards the end of the year but it has to be deployed somewhere,” he said.
While the monies from the multilateral lenders are meant for specific projects, monies from the Eurobond have no specific project assigned to them yet raising fears that they could be susceptible to misuse.
The loans will also result in an increase in public debt raising it to Sh7.7 trillion at the end of this financial year up from Sh7.34 trillion at the end of March, Ogutu said.
According to Njoroge, the country is keen on securing an extension of the Debt Service Suspension Initiative (DSSI) relief, saying the amount saved from so doing would depend on how long the relief is extended.
Free resources
“The answer, of course, is yes. Because it will free resources that can be used for other purposes and in particular, supporting the post-Covid economic recovery programme,” he said.
