The National Treasury is seeking Sh17.6 billion in the upcoming financial year to settle mounting debts owed to the Kenya Revenue Authority (KRA), including outstanding payments from previous budgets.
This request includes Sh6.06 billion previously approved but not disbursed, leading to accumulating liabilities that have affected KRA staff, contractors, and suppliers.
Rising Debt and Financial Struggles
Treasury Principal Secretary Chris Kiptoo disclosed that unpaid allocations have resulted in debts across key operational areas, including employee salaries, contracted services, and administrative expenses. By June 2024, KRA’s liabilities stood at Sh4.06 billion, exacerbating its financial woes.
One of KRA’s major creditors is SICPA Security Solutions SA, a Swiss firm supplying excise stamps. As of June 2023, KRA owed Sh2 billion to SICPA, but this debt ballooned to Sh3.62 billion by June 2024 due to foreign exchange losses and pricing challenges in the non-alcoholic beverage sector.
Debt Repayment and Budget Allocations
To ease the financial strain, KRA has negotiated to settle SICPA’s debt in local currency, reducing further exposure to forex fluctuations.
In addition to settling past dues, the Treasury has earmarked Sh11.57 billion for KRA’s 2025/26 budget, primarily to cover staff remuneration, pensions, and recruitment of critical personnel.
“The deferred budget had been approved for the current fiscal year but remains unfunded,” Kiptoo explained in a report to the National Assembly’s Finance and Planning Committee.
Concerns Over KRA’s Financial Health
A recent report by Auditor-General Nancy Gathungu raised red flags over KRA’s financial position, revealing that Sh17.37 billion remains due from the Treasury.
“The balance is classified as a non-current asset and represents cumulative funding allocations not received by the Authority over the years,” Gathungu stated, questioning its recoverability under public finance laws.
KRA’s Liquidity Crisis
KRA’s financial constraints were further underscored by its working capital deficit of Sh9.36 billion as of June 2024. With current liabilities of Sh13.43 billion far exceeding current assets of Sh3.94 billion, the agency faces growing pressure to meet its obligations.
Under Kenyan public finance laws, unspent government funds must be declared by February and reallocated in the next budget cycle. This regulation limits KRA’s ability to carry forward unused allocations, further straining its cash flow.
Way Forward
As the Treasury seeks additional funding to stabilize KRA’s financial position, stakeholders will be closely watching the budget allocations in the 2025/26 fiscal year. The effectiveness of these funds in clearing outstanding debts, securing employee salaries, and maintaining tax operations will be crucial in restoring KRA’s financial health.
