Kenyan govt to raise local revenue to 25% to curb external borrowing
Kenya will increase domestic resource mobilisation efforts from 19 to 25 percent of GDP in the next five years in order to cut on its high public debt.
Speaking during the launch of the Africa Foresight report compiled by The Brookings Institute, African Economic Research Consortium and Kenya Institute for Public Policy Research and Analysis at a Nairobi hotel yesterday, National Treasury cabinet secretary Henry Rotich said the government is going to adopt blended financing to cut external loans.
“We are going to intensify domestic revenue collection, seal illicit financial flow gaps and develop investment products for the diaspora population as part of blended finance strategy to minimize reliance on borrowing,” Rotich said.
He revealed that the state is in plans to tap into the informal sector to increase its tax bracket.
He said it will increase efficiency in curbing illicit financial flows in its plan to increase domestic revenue to 25 per cent of GDP.
“We are already working with KRA to assist county governments to collect enough revenues and stop dependence on exchequer funding. We are also banking on public private partnership to fund our infrastructural projects.”
Kenya has borrowed heavily in the past 10 years to finance infrastructure projects including geothermal energy, roads and the ongoing construction of the Standard Gauge Railway, pushing public debt to Sh4.5 trillion by end of last year.
The Africa Foresight report which was unveiled for the first time proposed blended finance, big bond and diaspora bond as a way the continent can source funding for economic growth.
Last financial year, it was at 2.2 per cent due to low commodity revenues brought about by drought.
Former CBK governor Njuguna Ndung’u urged African states to come up with favourable policies to enhance regional trade and attract investors in order to rejuvenate the Africa Rising aganda that has since lost steam.
He said Africa should emulate Asian tigers like Singapore and ride on technology and agriculture to grow its manufacturing sector.
“Realizing a future of African self reliance will require concerted support for sustainable development financing,” Brookings Institute director Brahima Coulibaly said.
“With external financing conditions likely to worsen due to low commodity revenues, possible sovereign downgrades and rising global interests, it will become imperative for African countries to enhance domestic resource mobilization,” Coulibaly said.