Kenya Sets FY2016/17 Budget Deficit to 9.3 percent Starting July

The Kenyan Treasury has projected an overall budget deficit equivalent to 9.3 percent of its gross domestic product for the fiscal year starting in July.

However, due to its low absorption uptake, it expects it to drop to 6.9 per cent of GDP according to the Budget Policy Statement for the FY-2016-17 .

“This would therefore lower the projected fiscal deficit including grants to Ksh 513.2 billion (equivalent to 6.9% of GDP) in the FY 2016/17, down from the estimated Ksh 516.3 billion (7.9 percent of GDP) in the FY 2015/16.”

With a positive economic growth witnessed in 2015 at 5.6 percent attributed to good weather that helped boost the agriculture sector, the ministry projects a 6.0 per cent growth in 2016.

“Going forward, we project the economy will expand further to 6.0 percent in 2016 from 5.6 percent in 2015 and 6.5 percent in the medium. This growth will be supported by strong output in agriculture with a stable weather outlook and completion of key public projects in roads, rail and energy generation. In addition, strong consumer demand and private sector investment as well as stable macroeconomic environment will help reinforce this growth,” according to the policy statement.

The ministry says to achieve the growth, they will focus on: Improving the business environment, Continued spending in infrastructure, sustaining sectoral spending for employment creation, Sustained investment in social services, Enhancing service delivery through devolution and continued structural reforms in the public sector, financial sector and business regulation.

Kenya’s original forecast deficit for fiscal 2015/16 was8.7 percent of GDP, but it is now expected to come in at 7.9 percent by the initiatives in place that put emphasis on efficiency and effectiveness of public spending and improving revenue performance.

“Going forward, we remain committed to bringing the fiscal deficit down gradually from the 6.9 percent of GDP in FY 2016/17 to 5.3 percent of GDP in FY 2018/19 and below 4.0 percent of GDP in the outer years.”

The government pegs on domestic borrowing e not only to raise resources for the national budget implementation but also to develop the domestic debt market. “External borrowing will largely be biased towards concessional loans.”

In fiscal 2016/17 the government is expected to borrow externally a net 459 billion shillings, the policy statement showed.

Net domestic borrowing is expected to be 241 billion shillings.