10 January 2019

Kenya: Govt Expenditure to Projected to Grow By 15% in 2018/19

Nairobi — The government expenditure is projected to increase by 15 percent in the 2018/19 budget according to analysts at Sanlam Investments.

In their 2018 outlook, the analysts say that the government has indicated that it will raise its domestic debt target from Sh272 billion to Sh319 billion for the fiscal year 2018/19 to bridge anticipated lower revenue collections and expensive external debt.

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The move comes as the Kenya Revenue Authority missed the collection target by Sh60 billion in the three months ended September on the back of a slowdown in economic activity and delayed implementation of some new tax measures.

Kenya's budget for Kenya has increased 15 times since 2002.

The country spends a lot on infrastructure, with projects such as Road expansion that includes the Thika Super Highway, electricity connection, the Standard Gauge Railway as well as the upgrading of airports.

Sanlam Investments also projects that the country will grow between 5.3 percent and 5.5 percent due to the interest rate cap that will continue to limit the availability of private sector credit.

"Moreover, the low base effect in Kenya's agricultural sector as the country recovered from a drought in 2017 that buoyed 2018 economic growth might not recur in 2019. These factors, combined with possible fiscal tightening measures and increased expenditure on debt repayments, are the most likely headwinds to the outlook," the analysts predict.

Kenya's credit growth has stagnated at single digits, expanding by just 4.4 percent in the year to October 2018.

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