Rationalise expenditure plans to narrow budget deficit, State told

Kenya is likely to come under severe fiscal pressure if the government does not rationalise its expenditure plan.

The International Budget Partnership says treasury needs to renegotiate its debt servicing schedule and suspend investments in non-essential capital projects.

International Budget Partnership Country Director Abraham Muriu says treasury ought to set realistic targets to reduce unnecessary deficits and focus on critical projects when borrowing.

2020/21 fiscal deficit is projected to rise to 840.6 billion shillings.

Kenya’s national budget has expanded consistently from 1.3 trillion as at the end of FY 2013/14 to an estimated 2.8 trillion in FY 2019/20 according to official figures from the National Treasury.

However, the growth has not been in tandem with revenue, which has only expanded from 1.0 trillion as at the end of FY 2013/14 to an estimated 1.6 trillion in the current fiscal year.

This has worsened the fiscal deficit which has widened from 300 billion in FY 2013/14 to a projected 900 billion equivalents to 8.0 percent of GDP in FY’2019/20.

Muriu says Kenya’s worsening fiscal space is eroding the country’s credit rating with the International Monetary Fund grading the country to high risk of debt distress due to the impact of COVID-19 pandemic.

Kenya’s public debt level has increased in the past 5 years from 50.2 percent of GDP in 2015 to an estimated 61.7 percent of GDP in 2019 occasioning a yawning budget deficit projected at 7.3 percent of GDP in the current fiscal 2019/20.

Muriu says debt repayment which will cost Kenya almost one trillion shillings can be delayed until the country; realigns its fiscal structures.

Public debt repayments will increase by 17.67 percent from 768.85 billion in FY 2019/20 to 904.70 billion in FY 2020/21 according to treasury estimates.

Also read https://www.kbc.co.ke/ksh-2-79-trillion-budget-money/