Business

Kenya's fiscal deficit to rise by 21% to Sh920 billion this year - report

Treasury CS Njuguna Ndung'u. (File)

By Alfred Onyango | Thursday, June 6, 2024

To address this, the Committee says financing of the gap will predominantly shift towards foreign borrowing.

The country's fiscal deficit for the Financial Year ending June 30 this year will increase by about 21 per cent to Sh920 billion.

The latest Public Debt and Privatisation Committee report on Supplementary Budget II 2023/24 and the 2024/25 Budget Estimates, says the fiscal framework underlying Supplementary Estimates II reveals an expansion in the fiscal deficit.

Keep reading

"The gap between expenditure and revenue for FY 2023/24 will increase by Sh33 billion, rising from Sh887 billion in Estimates I to Sh920 billion in Estimates II," the report reads.

This is from the Sh759.6 billion recorded in FY 2022/23 (5.3 per cent of GDP).

"Consequently, the fiscal deficit for FY 2023/24 will represent 5.6 per cent of GDP, surpassing the target fiscal deficit of 4.4 per cent."

The report adds that the 1.2 percentage point escalation in the debt-to-GDP ratio corresponds to an additional Sh201 billion in the fiscal deficit, leading to a proportional increase in debt accumulation for the year.

To address this, the Committee says financing of the gap will predominantly shift towards foreign borrowing.

Net foreign borrowing is thus anticipated to increase by Sh370 billion from the original estimates of the current Financial Year.

This will be driven by an over 700 per cent increase in program loans, depicting a greater reliance on concessional and semi-concessional loans.

On the other hand, net domestic borrowing is expected to be reduced by Sh180 billion from the original estimates.

Budget and Appropriations Committee indicates that 2023/24 net domestic financing is now set at Sh589.3 billion compared to Supplementary Budget I's Sh474.5 billion while net foreign financing is now set at Sh319.3 billion compared to Supplementary Budget I's Sh412.1 billion.

The Committee, however, blamed the recurring deficits on the National Treasury, saying the deficits are a result of its revenue overestimation.

"The revenue overestimations also necessitate increased borrowing to cover shortfalls," the Committee notes.