Kenya to Cut Budget Deficit to 3% By 2022

President Uhuru Kenyatta and Deputy President William Ruto (file photo)

Kenya will cut its budget deficit to 5.6 per cent of GDP in its 2019/20 fiscal year from 6.3 per cent in the current fiscal year.

In a draft budget summary presented to parliament this week, the National Treasury proposes to reduce the overall budget deficit to 3.8 per cent of GDP by the 2022/23 fiscal year.

This target is in line with efforts by the East African Community partners to narrow budget deficits to not more than 3 per cent as the bloc prepares for the monetary union in 2024. The deadline for abiding by the EAC Monetary Union Protocol.

The Treasury tabled a Ksh2.7 trillion ($27 billion) spending plan for the 2019/2020 financial year, with the focus on implementing President Uhuru Kenyatta's Big 4 Agenda.

Under the plan, the government has allocated Ksh451 billion ($4.51 billion) to boost manufacturing, ensure food security, achieve universal health coverage and provide affordable housing.

Technocrats at the National Treasury have been working to reduce the budget shortfalls to as low as three per cent of GDP by 2021.

But the United Nations Economic Commission for Africa (Uneca) has cast doubt on this plan, arguing that EAC economies' huge budget deficits have been precipitated by their large infrastructure spending and associated capital goods imports.

As a result, these economies have resorted to increased borrowing to finance their revenue shortfalls thereby pushing them into more debt.

In the coming financial year, Kenya plans to borrow Ksh324.3 billion ($3.2 billion), equivalent to 3 per cent of GDP, from external lenders, and Ksh289.2 billion ($2.9 billion), or 2.7 per cent of GDP, from the local money market.

Through its report on the preparedness of the EAC countries for a monetary union released last year, Uneca said that only Rwanda has consistently complied with the requirement on the fiscal deficit between 2010 and 2016.

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