More Debts ahead as Kenya’s 2018/2019 Budget set to Hit 3.07 Trillion Shillings

Kenya’s National Budget for the fiscal year 2018/19, projected at 2.5 trillion shillings is set to be read on June 14th2018.

This year’s budget will be a 9.1 percent increase from the current fiscal year’s budget of 2.3 trillion shillings signaling that Kenyans will have to dig deeper to finance it.

Kenya Revenue Authority is expected to raise 1.7 trillion shillings, a 9.1 percent rise from 1.3 trillion shillings previously.

The extra amount is expected to be raised from recent initiatives by the Treasury such as the imposition of fuel VAT beginning September 2018, in line with the deal that Kenya made with the International Monetary fund (IMF) in March 2018.

The fiscal deficit to GDP is expected to narrow to 6.0 percent from a projected 7.2 percent in the 2017/18 financial year, which is in line with the International Monetary Fund’s (IMF) recommendation in March as it pointed out that the initially targeted deficit of about 8.0-9.0 percent was not sustainable.

The National Treasury has budgeted a total of 97.7 billion shillings inclusive of 19.4 billion shillings in interest payments, to finance the USD 750 million, 5-year Eurobond issued in 2014 that is set to mature in the year ending June 2019.

Including interest payments from the USD 2.0 billion 2018 issue external debt financing in the 2018/19 fiscal year is estimated to increase by 51.9 percent to 364.7 billion shillings from 240.1 billion shillings in 2017/18, which will be 21.0 percent of budgeted revenues.

Debt sustainability continues to be a key concern, with the public debt to GDP estimated to have hit 55.6 percent by the end of 2017, 5.6 percent above the East African Community (EAC) Monetary Union Protocol, the World Bank Country Policy and Institutional Assessment Index, and the IMF threshold of 50.0 percent.