Kenya Lawmakers See Revised Budget Raising Debt to $65.4 Billion

NAIROBI (Capital Markets in Africa) – Kenyan lawmakers said that a proposed supplementary budget could increase public debt to 6.7 trillion shillings ($65.4 billion) by the end of 2019-20, saddling the economy with more liabilities.

The National Treasury asked parliament two weeks ago to approve almost 3% extra spending for the fiscal year through June 2020 after revenue collection came in below target. It also wants more funding for President Uhuru Kenyatta’s priority development projects known as Big Four that include boosting housing, health care, manufacturing and low-cost housing.

Some of the key increases include 65 billion shillings for the new projects, 16.9 billion shillings for a railway link between the capital and the port city of Mombasa and 5.3 billion shillings for an expressway in Nairobi, according to a budget committee report.

“The committee is concerned that it has become a trend that there are two supplementary budgets in any financial year, which is against international best practice and waters down the credibility of the budget as critical expenditures are left out during formulation of the budget with the expectation they will be funded in a supplementary budget,” according to the report.

Earlier this month, acting Treasury Secretary Ukur Yatani asked lawmakers to increase spending plans to 3.13 trillion shillings, barely five months after the initial budget was presented in parliament.

The committee projects revenue in 2019-20 of 1.7 trillion shillings, which will be 120 billion shillings below target. It recommended that the National Assembly should introduce legislation in the first quarter to establish an independent debt management office in view of concerns on rising public debt. The committee’s report is subject to a vote by the National Assembly.

Record Debt
Public debt hit a record 6.1 trillion shillings in August. Last month, the state raised its debt limit to 9 trillion shillings from an earlier cap of 50% of gross domestic product. The International Monetary Fund Managing Director Kristalina Georgieva said Nov. 19 that Kenya’s government needs to be “cautious” after it raised the borrowing ceiling and with debt at almost 60% of gross domestic product.

The supplementary budget will create a financing gap of 146.3 billion shillings, even after taking into account 78 billion shillings in retained earnings that the Treasury is demanding from state-owned enterprises, according to the report.

“If the supplementary budget was to be approved as submitted, the financing gap will have to be met from additional borrowing,” the committee said.

Source: Bloomberg Business News