PS Kiptoo: Kenya Uses Nearly Half of Tax Revenue to Service Debt

Treasury Principal Secretary Chris Kiptoo has revealed that Kenya is spending nearly half of its ordinary revenue on debt servicing, raising fresh concerns over the country’s financial stability.

Speaking during an interview on a local television station, Kiptoo said 48.5 per cent of all revenue collected by the Kenya Revenue Authority is used to service public debt and meet other consolidated fund obligations, including interest payments and pensions.

He warned that the situation has significantly reduced the government’s ability to fund development projects and essential public services, noting that almost half of every shilling collected is committed before any new spending decisions are made.

According to the Treasury, Kenya’s public debt currently stands at approximately Ksh 11.5 trillion, equivalent to roughly 64 per cent of the country’s Gross Domestic Product. The rising debt has continued to push up annual repayment costs, putting pressure on the national budget.

Kiptoo disclosed that the government has allocated approximately Ksh 1.1 trillion in the current financial year solely for interest payments on the national debt, describing the level of debt vulnerability as a matter that must be urgently addressed.

He attributed the growing spending pressure to population growth and increased demand for public services, saying Kenya’s population has risen from about 54 million three years ago to nearly 57 million today.

The education sector, he noted, consumes a large share of the national budget, with about Ksh 767 billion allocated to education, representing close to 27 per cent of total government spending. He added that the system absorbs about one million new learners every year.

On revenue collection, Kiptoo said the government is shifting focus from increasing tax rates to expanding the tax base to reduce the burden on salaried workers.

He highlighted a major imbalance in tax contributions, revealing that about 3.2 million formally employed Kenyans paid nearly Ksh 600 billion in Pay As You Earn tax, while an estimated 17 million people in the working-age population contributed only Ksh 18 billion in personal income tax.

Kiptoo said the figures show there is significant room to bring more taxpayers into the system, stressing that the current structure places a heavy burden on a small segment of the population.

Looking ahead, the Treasury plans to ease the tax burden in the medium term by lowering some tax rates, including reducing Value Added Tax and cutting corporate tax from 30 per cent to about 25 per cent.

However, Kiptoo emphasised that these reforms will only be possible if the government succeeds in broadening the tax base and improving revenue compliance to stabilise public finances.