Kenya’s foreign exchange (FX) reserves declined sharply by $226 million (Sh26.8 billion) after the National Treasury paid China loans borrowed to construct the Standard Gauge Railway (SGR).

Data from the Central Bank of Kenya (CBK) shows that FX reserves declined to $7.73 billion (Sh918.8 billion) by the end of Friday from $7.95 billion (Sh942.9 billion) the previous week.

These were enough to pay for the country’s imports for 4.46 months, which is below the East African Community’s convergence criteria of 4.5 months of import cover.

Official forex reserves have continued to drop, despite a steady inflow of Diaspora remittances from Kenyans living and working abroad.

This has been aggravated by a sharp rise in the cost of inputs in the global market following the Russia-Ukraine war and increased outflows by foreign investors at the Nairobi Securities Exchange.

On July 21, the National Treasury was to pay instalments for two loans for the Mombasa-Nairobi leg of the SGR and another for the Nairobi-Naivasha phase of the modern railway amounting close to Sh30 billion. The repayment has left a huge hole in the country’s reserve of hard currencies, leaving it in a precarious position in meeting its external needs at a time when Kenya is grappling with a dollar shortage.

However, the 4.46 months of import cover met “CBK’s statutory requirement to endeavour to maintain at least four months of import cover,” said the financial regulator in its Weekly Bulletin.

The reserves are likely to have improved after the Executive Board of the International Monetary Fund (IMF) approved the disbursement of some $235.6 million (Sh28 billion) to Kenya as part of a programme aimed at helping the country address its debt vulnerabilities.

The SGR is one of the many infrastructural projects that President Uhuru Kenyatta’s administration has constructed using debt, which stood at Sh8.56 trillion at the end of May, CBK data shows. Speaking during this year’s Madaraka Day celebrations at Uhuru Gardens in Nairobi, President Kenyatta hit out at those against his borrowing frenzy in the last 10 years.

Instead, he defended his administration for achieving a lot “using other people’s money.”

“The only time that debt is a burden to a nation is if the nation is led by a cabal of looters. But in the hands of a visionary administration, debt is a catalyst for rapid development,” he said.

All three loans for the SGR were procured from China Exim Bank and denominated in dollars. In total, Kenya borrowed close to $5.09 billion (Sh600 billion) for the construction of the two phases of the SGR. The two loans for the Mombasa-Nairobi phase of the SGR, which stood at $1.6 billion (Sh188.6 billion) and $2 billion (Sh235.8 billion) respectively, were signed in May 2014 and had a grace period of seven and five years respectively.

The loan for the Nairobi-Naivasha section of the railway of $1.5 billion (Sh176.8 billion) had a grace period of five years, having been signed in December 2015.

All these are to be repaid semi-annually on January 21 and July 21, with the interest rate calculated above the six-month London Interbank Offered Rate (Libor) rate.

Libor is the benchmark interest rate at which major global banks lend to one another in the international inter-bank market for short-term loans.

The two loans for the Mombasa-Nairobi phase, the $1.6 billion and $2 billion, are to be repaid in 13 and 10 years respectively, while that of the Nairobi-Naivasha phase of the SGR was to be repaid in 15 years. Repayment of its principal was to start in January 2021, while that of the $1.6 billion was to start in July of the same year. - Dominic Omondi, The Standard

A graphic depicting an online betting site. PHOTO | SHUTTERSTOCK/Photo Courtesy 

Tanzania has this month introduced a gaming tax on the amount or value of winnings through casinos and sports betting, tightening the noose on gamblers already squeezed by levies in neighbouring Kenya and Uganda.

In changes to its Gaming Act, Tanzania said levies of 12 percent and 10 percent are now applicable on the amount or value of all winnings in casinos and sports betting, respectively—joining its East Africa Community partners Kenya and Uganda, which have both already gone hard on gamblers with punitive taxes to discourage the addictive habit.

“The licensee of gaming activity is required to withhold gaming tax on winnings made and paid for. In this case, the licensee is the withholding agent who is required to remit the tax withheld on or before the seventh day of the month following the month of payment of the winnings; and submit a return or certificate of payment of tax withheld within 15 days after the end of each calendar month,” Tanzania’s Finance Act 2022 reads.

Until this month, Tanzania only focused on the taxation of revenue of betting firms through levies that ranged between 12 and 25 per cent. Its latest tax move means it is going after individual gamblers, hoping to discourage them through painful levies and also draw some revenue from the willing die-hard gamers.

In Kenya, gamblers already pay a 20 per cent tax on winnings that betting firms are required to withhold and remit to the Kenya Revenue Authority (KRA). This means that if for example one wins Sh1,000, he or she will receive Sh800 as the KRA takes Sh200. The levy on winnings by individuals is in addition to corporate income taxes levied on the gambling and gaming business.

In Uganda, the tax on the value of gaming winnings has been set at 15 per cent and withheld by gaming firms for subsequent remission to the revenue authorities.

The move by Tanzania solidifies a trend in which EAC countries are cracking down on gambling addiction through punitive taxation and other regulatory measures.

In Kenya, the government has sought to tighten the noose on gamblers with the State earlier this year even attempting to further raise the tax on betting stakes to 20 per cent.

In a proposal shot down by MPs, Treasury Cabinet Secretary Ukur Yatani had targeted heavier taxes on punters by raising the excise duty on cash wagered on betting, gaming, a prize competition, and buying a lottery ticket from the current 7.5 per cent.

In his unsuccessful submission, Mr Yatani said gambling and gaming had become “extremely addictive and can result in a variety of harmful repercussions, especially to the youth”.

A survey late last year showed that elderly Kenyans aged 55 and above topped the list of weekly gamblers in Kenya.

The elderly citizens bet 49 times a week on average – way higher than 41.4 per cent for all other age groups, the joint FinAccess Household survey by the Central Bank of Kenya (CBK), Kenya National Bureau of Statistics (KNBS), and Financial Sector Deepening Trust (FSD) Kenya revealed.

The average bet placed by the elderly persons is, however, the least among all age sets at Sh735-- an indication that they gamble for leisure rather than income generation as is the case among the more youthful players.

In the survey, 13.9 per cent of respondents reported being actively engaged in betting, with 18.4 per cent of those who bet being in urban areas and 11.4 per cent in rural areas.

“The gamers who perceive gaming as a source of income declined from 22.7 per cent in 2019 to 11.2 per cent in 2021 and the average amount used for betting declined to Sh939 in 2021 compared to Sh2,559 in 2019. This could be partly attributed (to the) government's deliberate measures to combat irresponsible and illegal betting,” the report notes.

Industry data shows that the gaming industry in Kenya records an average of Sh200 billion in annual sales.

This craze is reflected in the financial data of telecommunication firms such as Safaricom. For example, gambling enthusiasts in Kenya sunk Sh169.1 billion into bets through the M-Pesa mobile money platform in the year to March this year.

Data by Safaricom revealed that 732.29 million betting transactions were paid for through M-Pesa in the financial year ended March as more Kenyans tried their luck in betting at a time the economy is struggling to recover quickly enough from the lingering effects of the Covid-19 pandemic which has slowed job creation.

The value of bets placed via M-Pesa during the period marked a 23.8 per cent increase from the Sh136.58 billion in the previous year despite heavy taxation by the government to regulate the sector, which has been accused as a front for money laundering activities.

The Treasury in July last year reintroduced excise duty on betting and gaming at a rate of 7.5 per cent of the amount staked through the Finance Act 2021 in a move that was tipped to discourage punters from betting.

A 20 per cent excise tax was initially introduced in the year 2019 and saw several betting firms pull out of the local market but was removed in July 2020 through the Finance Act, 2020.

But barely a year later, Mr Yatani unsuccessfully proposed to raise the tax further from 7.5 per cent to 20 per cent in proposed changes to the Excise Duty Act through the Finance Bill 2022. By ALLAN ODHIAMBO, The East African

Photo Courtesy The Standard

The declaration by presidential candidates Raila Odinga of Azimio and George Wajackoyah of Roots Party that they will boycott today’s presidential debate has elicited mixed reactions, with questions emerging on the importance of the discourse.

While the organisers argue the debate is “for the people and not the candidates”, the civil society has termed Raila’s and Wajackoya’s decision as disappointing.

The Head of Presidential Debate Secretariat, Clifford Machoka, says such a discourse offers an opportunity for Kenyans to engage in issue-based politics, as opposed to political rallies that many voters do not attend. 

“In a country with diverse voices, the debate brings clarity of issues from what we see in campaigns. It allows voters to make informed decisions and offers the opportunity to hold leaders accountable for what they say,” said Machoka.

Formal political debates are not new in Kenya. Kenyans witnessed the first two-round presidential debate on February 10, 2013, and the next a fortnight later.

It was the first political discourse of its kind that limited politicians from the “us versus them” rhetoric – normally spiked with mockery and political slurs directed at their opponents – and created a space where the politicians could speak to issues bedeviling the electorate without sideshows.

In the 2013 presidential debate, all eight candidates were in attendance and they discussed land issues, foreign policy and the economy. With the country having a history of the political class mobilising and dividing voters along ethnic lines, the question of the role of ethnicity in politics opened the floor.

It is not mandatory for any candidate to appear for the debate. Following the first round of the 2013 debate, President Uhuru Kenyatta (then deputy prime minister) threatened to snub the second round, with the Jubilee presidential campaign secretariat accusing the moderators of deliberately allowing other candidates to escape public scrutiny over various national scandals that had characterised their political careers.

Uhuru was hard pressed to disclose how many acres of land the Kenyatta family owns and how he would fairly address the land issue if elected.

In 2017, President Kenyatta chose to give the debate between him and Raila a wide berth.

On today’s debate Raila Odinga Presidential Campaign Secretariat Spokesman Makau Mutua said the Azimio la Umoja One Kenya flagbearer would not participate in a process he claimed his opponent William Ruto had tried to influence to be devoid of questions on corruption and integrity. 

“He is a man who has no regard for ethics, public morals or shame. That is why we do not intend to share a national podium with a person who lacks basic decency,” Prof Mutua said in a statement.

Prof Wajackoyah, on the other hand, is against dividing aspirants into two tiers, saying this is bias and aims to isolate some candidates.

The civil society termed Raila’s decision an outright betrayal of the efforts of pro-democracy activists like George Anyona, who suffered in the hands of the government while fighting to tear down Kanu’s one party rule.

“With many Kenyans cynical and 15 per cent still undecided, issue-based dialogues are fundamental for restoring the power of the vote for millions,” said Amnesty International Kenya Executive Director Irungu Houghton.

Mr Irungu said the presence of all presidential candidates arguing out issues on one stage and in a civilised manner is a statement of a mature democracy and any candidate pulling out at this stage is ill-advised. 

“This Presidential Debate is not a duel between politicians, or a televised debate watched by 34 million people. These debates are how us, as voters, listen to all ideas and choose those who come to lead us.

“They are the starting point of rebuilding national public accountability and the leadership integrity of all candidates,” he said.​

Seen as a sign of a mature democracy, the debate has also grown in great strides. Compared to the 2013 and 2017 debates, this year’s discourse expanded to include running mates of presidential aspirants and a Nairobi governor candidates’ debate – all of which got a stellar reception.

“The debates allow us to move away from the rally format and raise the profile of the conversation. This in turn gives the audience the opportunity to compare the submissions of the aspirants,” said Irene Kimani, a member of the Presidential Debate Secretariat.

Unlike the 2013 debates, which hosted all eight presidential candidates on the same stage in a three-and-a-half-hour marathon, this year’s regulations, similar to those in 2017, divided the debate into two tiers informed by the candidates’ popularity based on recent opinion polls.

Those who scored below five per cent will be clustered separately from those who scored higher.

In 2013, despite the debate receiving overwhelming praise as a result of its maiden execution, there was criticism over having all candidates debating at once, with many saying it was too cumbersome and difficult to follow.

“We decided to work with this format because it allows us to delve deeper into issues and allow every candidate to have adequate time to tackle the issues,” said Ms Kimani. By Judah Ben-Hur, The Standard