Kenya Raises Budget-Deficit Forecast Second Time in Two Months
Kenya Raises Fiscal-Deficit Projection Second Time in Two Months
Kenya raised its budget-deficit forecast for the second time in less than two months as the East African nation’s government weighs spending cuts.
The gap for the year through June is forecast at 6.2% of gross domestic product, compared with estimates of 5.9% in September and 5.6% earlier, the National Treasury said in a report posted on its website.
A wider deficit reflects the government’s failure to meet its 2018-19 revenue targets and comes as the Treasury considers reviewing its debt and spending plans. While lawmakers earlier this month approved measures that would increase borrowing, the government said it’s also considering spending cuts.
The Treasury has also revised down Kenya’s nominal GDP by 3.7% to 10.4 trillion shillings ($100.7 billion), and expects a reduction in grants this year, according to budget documents.
The 2019-20 gap of 640.2 billion shillings will partly be plugged with net external financing of 331.3 billion shillings and 305.7 billion shillings of domestic borrowing, according to the Treasury.
Debt Ceiling
In a bid to narrow the deficit to 5.3% of GDP in 2020-21, the government plans measures to boost its revenue, while curbing spending on items like travel, printing and advertising. That will free up funds to “prioritize development expenditures,” the Treasury said.
The National Assembly Oct. 9 approved a new debt ceiling of 9 trillion shillings, which allows Kenya to increase borrowing to almost match the size of the entire economy, and is about double the previous cap of 50% of GDP with debt at net present value.
Kenyan authorities are discussing 44 loan agreements valued at about $4.1 billion with 15 lenders, including the African Development Bank, China, Japan and the World Bank, parliament documents show.
The government asked for the shift of the debt ceiling partly because “there is no scope to raise taxes to close the fiscal deficit without negative effects on the entire economy,” acting Treasury Secretary Ukur Yatani told lawmakers earlier this month.
To contact the reporter on this story: David Herbling in Nairobi at dherbling@bloomberg.net
To contact the editors responsible for this story: David Malingha at dmalingha@bloomberg.net, Paul Richardson
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