Kenya’s Budget Gap to Widen Further
Kenya’s Budget Gap to Widen Further
Revenue shortfalls are forcing Kenya’s National Treasury to abandon earlier plans for budget cuts, and it has instead asked lawmakers to approve an increase in spending.
Acting Treasury Secretary Ukur Yatani wants to expand 2019-20 spending plans to 3.13 trillion shillings ($30.6 billion), almost 3% higher than what was presented in June, according to documents he submitted to the budget committee. That’s in contrast to the “brutal” cuts he pledged two months ago to align the budget with the reality of under-performing revenue and the need to curb the government’s debt appetite.
The Treasury consequently raised its budget-deficit forecast for the year through June to 6.3% of gross domestic product, according to the documents. It’s the third upward revision of the gap this year, after revenue in the three months through September was 410.5 billion shillings, below a target of 495 billion shillings.
“Fiscal consolidation will be slow because they have diluted the earlier commitment for reducing expenditure,” said Faith Atiti, senior economist at Nairobi-based NCBA Bank Kenya Ltd. The government has to get its house “in order unless we are projecting revenue will increase, which is not the case.”
President Uhuru Kenyatta is struggling to continue funding his so-called Big Four Agenda to boost manufacturing, housing, farming and health care when revenue is under-performing. The National Assembly Oct. 9 approved the administration’s plan to shift the debt ceiling to 9 trillion shillings, effectively opening room for more borrowing.
Implementing the budget has also been challenged by increasing demand to spend on priority projects and unfavorable weather that has curbed farm harvests, Yatani said in the documents.
“It is worrying that the deficit has been revised wider for the third time in as many months,” said Yvonne Mhango, Renaissance Capital’s sub-Saharan Africa’s economist. “It suggests that the government is struggling to implement fiscal consolidation.”
To contact the reporters on this story: David Herbling in Nairobi at dherbling@bloomberg.net;Eric Ombok in Nairobi at eombok@bloomberg.net
To contact the editors responsible for this story: David Malingha at dmalingha@bloomberg.net, Ana Monteiro
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