According to a summary of updated spending projections provided to parliament on Friday, Kenya has increased its prediction for the budget deficit for the 2023–24 (July–June) financial year, raising it from 4.4% to 5.3% of GDP.
According to Finance Minister Njuguna Ndung’u, the increase in the estimated amount of cash needed to repay foreign loans throughout the time was driven up due to the weakness of the Kenyan shilling versus the dollar. This caused the forecast to become more expansive.
“Our data has shown that approximately 145 billion shillings are accounted for by increased interest costs on the external debt space as well as debt volume increases due to exchange rate depreciation,” he said to Reuters.
Among the government’s obligations to pay back debt denominated in foreign currencies is a Eurobond with a maturity date of June 2019 and a value of 2 billion dollars.
After a rise in rates made refinancing the bond unattainable, investors have started to get concerned about the bond’s impending maturation date.
President William Ruto’s administration had significantly reduced the budget deficit when it first presented it to parliament in June. This was done to convince investors that the government was serious about reining the ever-increasing debt.
However, this attempt has been rendered fruitless due to the significant depreciation of the shilling against the dollar in 2018. The shilling has lost 18% of its value against the dollar thus far in 2018.
“It is time to drop politics and look at the reality in the world’s economies,” according to Ndung’u.