Kenya plans a leaner budget for 2020/21, cuts deficit to 4.9%

Kenya’s government has lined up Sh2.91 trillion budget for the financial year starting July, targeting a deficit of 4.9 per cent compared to this years 6.3 per cent.

This is expected to ease pressure on budget and perhaps help contain the country's borrowing appetite that has seen public debt rise to Sh6 trillion, forcing the state to impose high tax regime, hence high cost of living.

Kenya’s fiscal deficit, which peaked at 9.1per 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.

President Uhuru Kenyatta’s government has been criticised by locals and international partners for borrowing heavily since coming to power in 2013, forcing his administration to put a medium term debt ceiling of Sh9 trillion last year after breaching initial targets.

Reflecting the projected expenditures and revenues, the fiscal deficit for the upcoming financial year is projected at Sh571.2 billion against the estimated overall fiscal balance of Sh657.4 billion for the year ending June 30.

The Treasury plans to borrow Sh222.9 billion locally to plug the budget gap and tap another Sh345.1 billion from foreign sources.

''Consequently, the expenditure is expected to drop to 23.6 per cent of gross domestic product (GDP) from 26 per cent in the current fiscal year, Treasury said the Budget Policy Statement,'' Treasury said in the Budget Policy Statement.

The exchequer is projecting total revenue collection including Appropriation-in-Aid (A.i.A) to increase to Sh2.13 trillion which is 18.3 per cent of GDP up from the estimated Sh2.08trillion or 20.1 per cent of GDP in the current financial year.

According to Treasury, revenue performance will be underpinned by on-going reforms in tax policy and revenue administration.

Kenya Revenue Authority is expected to collect Sh1.86 trillion from the 1.84 trillion this year.

“Revenues as a share of GDP are projected to remain at 18.4 per cent in the medium term,” Treasury said.

While the government expenditure is projected to decline as a share of GDP to 23.6 per cent, the overall nominal expenditure and net lending for the planned year is projected Sh2.74 trillion from the estimated Sh2.88 trillion.

The expenditures comprise of recurrent of Sh1.78 trillion or 15.3 per cent of GDP and development of Sh587.3 billion or five per cent of GDP.

Treasury has allocated Sh1.77 trillion to executive down from Sh1.1.94 trillion this year while that of Judiciary and Parliament have also been trimmed to Sh18 billion and Sh36 billion respectively.

The government will primarily focus on priority programmes aimed at achieving the “Big Four” Agenda of universal health coverage, affordable housing, manufacturing and food security.

The universal health has been allocated Sh120.4 billion for the upcoming financial year of which Sh64.2 billion is recurrent and Sh56.2 billion is development. This is an increase compared to Sh114.5 billion allocated in the current financial year.

To boast infrastructure to support affordable housing and manufacturing, Treasury has allocated Sh388.9 billion of which Sh 93.1 billion for recurrent and Sh295.9 billion for development.

''These priorities notwithstanding, the government will strive to ensure that public spending leads to high quality outcomes. Consequently, the medium-term spending programme will continue to focus on the quality of public spending,'' Treasury said.