Kenya Plans to Narrow Fiscal Deficit to 5% of GDP in 2019-20

NAIROBI (Capital Markets in Africa) – Kenya, East Africa’s biggest economy intends to narrow its budget deficit to 5 percent of gross domestic product in the fiscal year beginning in July, from 6.3 percent in the current period.

The budget gap is seen at 572.2 billion shillings ($5.62 billion), compared with an estimated 635.5 billion shillings in the 12 months through June, the Treasury said in a draft document on its website.

It plans to finance the hole partly by external borrowing of 306.5 billion shillings, or 2.7 percent of GDP, and 271.4 billion shillings, equivalent to 2.4 percent of GDP, from the domestic market.

“To achieve these targets, the government will continue to restrict growth in recurrent spending while doubling its effort in domestic resource mobilization,” according to Treasury.

Moody’s Investor Service expects a narrowing of the deficit to around 6.5 percent of GDP in fiscal year 2019, higher than the government’s target. Last month, the International Monetary Fund said Kenya may need some spending restraint to further reduce its fiscal deficit from 7.5 percent at the end of June 2018.

Kenya’s Treasury said expenditure and net lending in the fiscal year beginning July 1 are projected at 2.7 trillion shillings, or 23.8 percent of GDP, from the estimated 2.51 trillion shillings, or 25.1 percent of GDP, in the revised budget for the preceding fiscal year.

It expects to spend 1.66 trillion shillings on recurrent costs and a development budget of 670.9 billion shillings, and projects revenue of 2.08 trillion shillings, compared with 1.83 trillion shillings this fiscal year.

Source: Bloomberg Business News