National Treasury seeks Sh17.6 billion to settle mounting debts owed to KRA
KRA’s liabilities related to employee salaries, contracted services, and operational costs reached Sh4.06 billion by the end of June 2024.
The National Treasury is seeking Sh17.6 billion in the coming financial year to settle debts owed to the Kenya Revenue Authority (KRA), including pending payments from previous budgets.
This amount includes Sh6.06 billion approved in earlier financial years but not disbursed, leading to accumulating liabilities for KRA.
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Treasury Principal Secretary Chris Kiptoo revealed that the unpaid funds have created debts for KRA staff, contractors and suppliers, with the agency facing penalties due to continued non-payment.
"These amounts had already been committed in expenditure items which have now turned into debt," Kiptoo stated in a report to the National Assembly’s Departmental Committee on Finance and National Planning.
KRA’s liabilities related to employee salaries, contracted services, and operational costs reached Sh4.06 billion by the end of June 2024.
The agency also owes Sh2 billion to SICPA Security Solutions SA, a Swiss company supplying excise stamps, for payments due in the financial year ending June 2023.
The debt to SICPA grew to Sh3.62 billion by June 2024 due to foreign exchange losses and pricing challenges in the non-alcoholic beverage sector.
Pricing model
KRA, in its latest annual report, attributed the debt partly to a pricing model where non-alcoholic beverages are priced lower than the cost of excise stamps, compounded by the depreciation of the Kenyan shilling.
To mitigate further losses, the agency has negotiated to settle the debt in local currency.
Beyond clearing past debts, the Treasury is requesting Sh11.57 billion for KRA’s 2025/26 budget to fund staff remuneration, including salaries, pensions and recruitment of critical personnel.
"The deferred budget had been approved for the current fiscal year but remains unfunded," Kiptoo explained.
A report by Auditor-General Nancy Gathungu highlighted concerns over KRA’s financial position, noting that Sh17.37 billion remains due from the Treasury.
"The balance is classified as a non-current asset and represents cumulative funding allocation not received by the Authority over the years," Gathungu stated, raising doubts about its recoverability.
Under public finance laws, government entities cannot retain unspent funds beyond the financial year ending in June. Unused allocations must be declared by February for reallocation in the next budget cycle.
KRA’s financial struggles were further highlighted in its working capital deficit of Sh9.36 billion as of June 2024. Its current liabilities stood at Sh13.43 billion, surpassing its current assets of Sh3.94 billion. This net liability position puts pressure on KRA’s ability to meet its financial obligations.
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