Kenya lays plan to slash budget deficit

National Treasury to release Ksh.39 billion to counties

Kenya aims to reduce its budget deficit by five percent in the next five years to 2026/27, in order to reduce its debt burden.

The country is currently running on a public debt that has recently ballooned to Ksh.8.2 trillion, with MPs proposing to raise a debt ceiling to Ksh.12 trillion to create room for more borrowing.

According to the National Treasury, the deficit is expected to drop gradually every financial year from 8.2 percent in 2021/22, 6.9 percent in 2022/23, and 4.4 percent in 2023/24. It is expected to drop further to 3.9 percent in 2024/25 and 3.2 percent in 2025/26.

”We project to cut annual debt financing to below Sh700 billion within the medium plan,” said National Treasury.

Ukur Yatani-led Ministry is eyeing to borrow Ksh.125.5 billion and Ksh.502.1 billion in 2025/26 fiscal year.

The development budget is projected to be near Ksh1 trillion by the end of the medium plan.

Majority Leader Amos Kimunya earlier last week moved to parliament to push an amendment to the 2022/23 Budget Policy Statement (PBS) directing the Treasury to amend the law to accommodate the huge budget deficit

“We are looking at Sh12 trillion but Sh15 trillion on a long-term basis to avoid constant reviews. We are also looking at Public-Private Partnerships options to limit borrowing,” said an official who spoke to The Star.

The country’s gross public debt is Ksh.8.2 trillion while the total external loan is Ksh.4.174 trillion with multilateral loans standing at Ksh.1.782 trillion, commercial Ksh.1.208 trillion and bilateral Sh1.17 trillion

External Debt Service to Revenues ratio

By September 15, 2021, Kenya’s external debt service to revenues ratio declined from 20.8 percent in June 2000 to 4.3 percent in June 2013, then rose to a high of 21.4 percent in June 2019.

The high ratio in June 2019 was mainly on account of a one-off USD 750 million Eurobond repayment.

The ratio has been declining in the last 2 years also due to an improvement of the terms on new external loans, according to the Central Bank of Kenya.

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