Kenya Envisions a Decreased Deficit in the Upcoming Fiscal Period
Nairobi, Feb 16 (Reuters) – Kenya has outlined plans to reduce its budget deficit for the fiscal year 2024/25 (July-June) while focusing on supporting growth-oriented expenditures, as revealed in the finance ministry’s budget policy statement.
According to the policy statement released late Thursday, the projected deficit is set to narrow to 3.9% of the country’s Gross Domestic Product (GDP), down from the 4.9% recorded in the current financial year. The government plans to secure 326.1 billion shillings through net external financing and an additional 377.7 billion shillings through net domestic borrowing to cover this deficit. The overall spending is expected to increase to 4.19 trillion shillings ($28.90 billion), up from an estimated 3.90 trillion in the current fiscal year.
To manage its finances, the Kenyan government is engaging in a buyback of more than $1.4 billion of its $2 billion Eurobond bond, set to mature in June. This strategic move has contributed to a rally in the Kenyan shilling, recovering to its most substantial level against the dollar since June 2023, following months of investor concerns about the nation’s ability to settle the 2024 bond.
The finance ministry’s policy statement also maintained the annual economic growth forecast at 5.5%, reflecting a positive outlook. President William Ruto’s government, which assumed power in September 2022, inherited a situation marked by a decade of debt-driven infrastructure spending. Public debt levels had surged to nearly 70% of GDP from just over 40% a decade earlier. In response, the government has implemented various measures, including tax adjustments, to control debt levels and support economic growth.
As Kenya navigates its fiscal landscape, the outlined plans aim to balance deficit reduction and sustaining essential expenditures for economic development. The government’s commitment to fiscal responsibility and growth-oriented strategies will be closely monitored in the upcoming fiscal year.
