3 Reasons Economy is Struggling Despite Ksh1 Trillion Revenue Collection
On Monday, the Kenya Revenue Authority (KRA) exceeded the Ksh1 trillion milestone in revenue collection for the year 2023, achieving this goal three weeks ahead of schedule.
Although Kenya is performing well in terms of gathering revenue, the nation still faces economic challenges, as acknowledged by National Treasury Cabinet Secretary Njuguna Ndung’u on December 6th.
During his appearance before the Parliamentary Finance Committee, the Treasury CS disclosed that Kenya Kwanza was facing challenges in fulfilling its financial responsibilities, such as paying civil servants’ salaries.
One of the primary causes of the nation’s difficulties stems from the private sector’s shrinkage.
Over the past 11 months, Kenya has only surpassed the 50-point threshold in the Purchasing Managers Index (PMI) once, which occurred in August.
A PMI score below 50 signifies a situation where the private sector experiences a decline, marked by businesses facing losses or shutting down completely.
Some of the industries that have been affected by this contraction include; manufacturing, agriculture, mining, services, construction, and retail sectors.
A decline in the private sector’s growth results in the country losing out on significant revenue generated from taxes like Value Added Tax (VAT), Pay As You Earn (PAYE), Corporations, and various other tax sources, amounting to millions.
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The country has also been struggling financially due to an increase in fuel prices.
As per the Transport Index, the rise in fuel costs has adversely affected the generation of revenue.
Due to the high costs of petrol at Ksh217 and diesel at Ksh205, numerous drivers have opted for public transportation, causing a downturn in revenue collection.
Finally, the depreciation of the Kenyan Shilling poses a severe threat to the nation’s economy.
The depreciation of the Kenyan Shilling has led to increased prices for essential goods, consequently elevating the overall cost of living and diminishing the buying capacity of numerous households.
Additionally, the weakening of the Shilling which has seen the local currency trade against the dollar at above Ksh150 for the first time in history has affected import demand.
Many importers have been wary of the high exchange rates which erode their capital thereby reducing the quantities imported.
The increased cost of importation due to weak Shilling is passed on to the consumer which has seen prices of commodities increase significantly.
3 Reasons Economy is Struggling Despite Ksh1 Trillion Revenue Collection
