Campaigners urge Kenya to prioritize domestic resource to cut borrowing
Campaigners on Monday urged Kenya to prioritize domestic resource mobilization in order to reduce reliance on foreign borrowing.
Tax Justice Network Africa Deputy Executive Director Jason Braganza told a media briefing in Nairobi that the current global economic slowdown means that traditional donor nations are reducing overseas development aid.
"As a result, we recommend for Kenya and other African countries to focus on domestic resource mobilization in order to reduce budget deficits," Braganza said during a civil society forum on the proposed Nairobi International Financial Center Bill.
Kenya hopes that the Nairobi International Financial Center will provide funding for key development projects as well as employment opportunities for the growing youth population.
Braganza said that key sources of domestic resources include taxes and natural resources such as minerals and hydrocarbons.
He noted that Kenya can achieve optimum domestic resource mobilization by diversifying the economy.
The Tax Justice Network Africa said that in the long run, taxation is a better way to fund government projects compared to use of borrowings.
"Uncontrolled borrowing could result in public debt that is unsustainable," he added.
According to the advocacy group, tax incentives offered to multinational corporations tend to deplete rather than build up the country's financial reserves and hence complicates efforts towards domestic resource mobilization.
A recent study indicated that Kenya loses approximately 1.1 billion U.S. dollars annually in tax revenue by giving tax breaks to corporations, according to Braganza.
He noted that tax incentives were not the best way to attract foreign direct investments as "corporations are likely to move to countries that have favorable business climate by having less bureaucracy and proper security."