Experts in Kenya are warning that the government's ongoing securitization of key funds could have long-term consequences on the country's revenue streams. According to Alexander Riithi, Head of Programs at The Institute of Social Accountability (TISA), the government's decision to leverage funds for infrastructure projects may limit its ability to fund essential social programs in the future. This comes as the government has already securitized the Road Maintenance Levy Fund, committing Ksh 7 per liter of fuel to repay debt.
The securitization of funds has been done off-balance sheet with minimal input from Parliament, raising concerns about the lack of transparency and public participation. Riithi called for a regulatory framework to guide securitization, ensuring that the terms of the agreements are available to the public and that there is public participation. He also noted that the mechanism of securitization is increasing the cost of doing business and the cost of living.
The International Monetary Fund (IMF) has also expressed concerns about the financing model, arguing that it should be part of Kenya's total outstanding public debt. The use of funds as collateral has been put under scrutiny amid the Kenya Revenue Authority's (KRA) failure to meet collection targets, driving up public debt due to extra borrowing to plug the deficit.
As of June this year, Kenya's total public debt stood at Ksh 13 trillion, with domestic debt accounting for Ksh 7.33 trillion and external debt Ksh 5.68 trillion. According to Kwame Owino, Chief Executive Officer at the Institute of Economic Affairs, 55% of the debt is domestic, meaning that Kenya owes more to institutions within the country than to foreign entities.
The country's budget shortfall for the fiscal year 2024/25 was reported at Ksh 1.2 trillion, and is expected to widen in the current year due to the upcoming General Election. This has raised concerns about the government's ability to fund essential social programs and infrastructure projects.
Experts are urging the government to exercise caution when securitizing funds, as it may limit its ability to respond to future economic shocks. The government's decision to securitize funds has also raised concerns about the impact on the country's credit rating and its ability to access international markets.
The Kenya Editors' Guild (KEG) and the International Republican Institute (IRI) organized a forum to discuss the implications of securitization on Kenya's economy. The forum brought together experts and stakeholders to discuss the need for a regulatory framework to guide securitization and ensure transparency and public participation.
Key points
- Experts warn that securitization of key funds may erode Kenya's revenue collection base.
- The government's decision to securitize funds has been done off-balance sheet with minimal input from Parliament.
- Kenya's total public debt stands at Ksh 13 trillion, with domestic debt accounting for 55% of the total.
