Treasury cash data fails to reveal a broke government

Treasury data indicates that the government’s fiscal position was better in March than in February despite larger debt payments, contradicting public statements by officials who portray the government as bankrupt.

President William Ruto, Vice President Regathi Gachagwa and a group of senior administration officials recently blamed delays in paying civil servants in March for an acute cash crunch and repayment of loans that they said would require the government to pay around Ksh150 billion to creditors. The amount normally paid.

Treasury data published in the latest notice from the Kenya Gazette shows that Kenya’s debt repayment bill grew to Sh121.3 billion in March from Sh66.7 billion in February, reflecting an additional Sh54.6 billion.

But revenue for the month of March grew from Sh84.2 billion to Sh260.9 billion, which was more than enough to cover the additional debt repayment expenses.

Senior Treasury officials, while acknowledging the liquidity crisis, have sought to downplay claims by the presidency and politicians that Kenya is bankrupt.

Officials believe Kenya can meet its basic obligations, including paying debts and civil service salaries, on time.

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The daily business Investigations revealed that the majority of civil servants had received their salaries at a time when politicians sounded the alarm that the government had failed to pay the March salaries of workers in the national government.

“The government is not bankrupt because the government has so far been able to pay debt obligations when they are due. In other words, we have not defaulted on debt obligations,” a senior Treasury official, speaking on condition of anonymity, told The daily business.

Some leaders went on to declare the government “bankrupt”, blaming the previous administration of Uhuru Kenyatta for excessive borrowing, the repayments of which were quickly overdue.

An analysis of monthly expenditures from the government’s main account, the Treasury, revealed that it was not the first time it had faced debt obligations of this magnitude relative to revenue.

The data, published by Treasury Secretary Nguguna Ndongo, shows that higher debt obligations in March, largely driven by interest payments to domestic creditors, were lower than in January.

Treasury data shows debt costs of Sh121.32 billion for the month of March were slightly lower than the Sh123.53 billion paid in January when semi-annual loan repayment obligations to China came due.

Liabilities in March were equivalent to 77.19 per cent of March taxes of Sh157.17 billion, lower compared to January (81.20 per cent) and November (78.40 per cent).

The Ruto administration, which seized power on a pledge to raise the economic welfare of those at the bottom of the pyramid, tends to blame the previous administration for economic hardships, including the high cost of living.

In explaining the March salary delays and the prolonged failure to disburse money to the provinces on time, Mr Gachagua said, for example, that the current administration is rebuilding the economy “from scratch” after inheriting “empty” coffers from the previous treasury that “borrowed money” left right and center.”

He echoed President Ruto’s comments.

Dr. Ruto said on April 11, explaining the delay in paying department employees and releasing shareable revenue for counties.

Kenya’s public wage bill was expected to come in at Sh131.9 billion in the three months to December, which puts the monthly bill at Sh43.9 billion.

The data shows that total revenue in March grew at a faster pace of 15.48 percent year-on-year to Sh260.91 billion, against a 13.18 percent increase in spending to Sh259.63 billion.

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The amount of Sh260.91 billion was an increase from Sh176.7 billion in February, resulting in an increase of Sh84.2 billion including additional taxes of Sh22.7 billion and Sh43 billion in loans.

“The challenge the government is facing is a temporary shortage of liquidity due to delays in receiving funds expected earlier, but now due to be disbursed in May-June 2023,” the Treasury official said.

“The government has also avoided borrowing from international markets because the international financial markets are not favorable at the moment.”

The data shows the Treasury is struggling to raise funds domestically, with nine months of borrowing (new borrowing and extension) through March falling short of the target of Sh268.57 billion on a pro-rata basis.

It comes after the Central Bank of Kenya, the government’s fiscal agent, collected NIS 396.32 billion in the review period against a full-year target of NIS 886.52 billion.

Bond sale data, for example, shows that only one in four Treasury bonds offered this year has met its target, as investors demand a higher interest than what the government offers.

The interest rates on the bonds ranged between 12.9 percent and 14.4 percent this year, compared to returns that ranged between 11.2 percent and 13.9 percent in the same period last year.

Is public financing that difficult? Debt servicing is said to take up 60%+ of revenue each day. Liquidity crisis comes with the region. When maturities pile up, revenues fall short, or markets change, something has to deliver. Salary or default? David Ndi, economic advisor to the president, said on social media, “Take your pick.

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