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Kenyan Treasury Opposes Plan to Securitize Pending Bills
NAIROBI (Capital Markets in Africa) – Kenya’s Treasury opposed a plan by lawmakers in East Africa’s biggest economy to securitize the country’s stock of pending bills for supplies and services rendered, saying it will only inflate debt costs.
In the fiscal year through June 2019 the state owed suppliers 190 billion shillings as tax collectors struggled to meet revenue-collection targets. The late payments resulted in ballooning bad debt at commercial lenders and stalled projects that forced some businesses to fire staff or freeze jobs.
“We can’t postpone and continue accruing interest on the same,” Yatani said of the proposal in a text message in response to queries.
His office estimates that Kenya’s public debt-servicing costs will climb 10% in the coming fiscal year to 630.1 billion shillings, or a third of projected ordinary revenue.
Securitization in Kenya isn’t unprecedented. In 2003-04, the state issued special Treasury bonds worth 7.47 billion shillings to contractors for work done, according to parliament’s records.
Issuing bonds gives the Treasury some breathing space and is better than “relying on shrinking revenue,” Kimani Ichung’wah, chairman of the National Assembly’s Budget and Appropriations Committee, said by phone.