Treasury to cut budget by 3.6pc
Nairobi, Tuesday
The government plans to cut State spending in the financial year starting in July to 23.6 per cent of gross domestic product (GDP) from 26 per cent in the current fiscal year, National Treasury said in its budget policy statement.
Belt-tightening measures will help the government meet its target to reduce the fiscal deficit for the period to 4.9 per cent of GDP, down from 6.3 per cent for this fiscal year, the Treasury said in the statement seen by Reuters yesterday.
“Revenues as a share of GDP are projected to remain at 18.4 per cent in the medium term,” the ministry said.
Planned borrowing
Treasury plans to borrow Sh222.9 billion locally to plug the budget gap and tap another Sh345.1 billion from foreign sources, the statement added.
President Uhuru Kenyatta’s government has been criticised by voters for borrowing heavily since coming to power in 2013, and his administration was forced to raise its borrowing ceiling last year after breaching initial targets.
Kenya’s fiscal deficit, which peaked at 9.1 per cent of GDP in the 2016/17 financial year, has been exacerbated by higher spending on infrastructure projects including a new railway financed by China.
Fiscal gaps have been accompanied by the consistent failure of Kenya Revenue Authority (KRA) to meet the government’s lofty revenue collection targets.
On Monday, Citigroup Inc termed Kenya’s budget deficit is its Achilles’ heel with investors calling for real proof that it’s being tamed in a sustainable way.
This after Treasury had earlier raised the budget-gap projection for the year through June for a third time to 6.3 per cent of gross domestic product.
In recent years, Treasury repeatedly modified its financing shortfall and failed to hit those forecasts, making its estimates seem unreliable.
“What people want to see from the Kenyan government is the reduction in fiscal deficit over a number of years,” Citi’s chief economist for Africa, David Cowan, said in an interview in Nairobi. –Reuters
Additional reporting by Bloomberg
