Ratings agency Fitch says budget to its expectation

National Treasury Cabinet Secretary Henry Rotich poses for a photo outside The National Treasury Building ahead of the 2018/19 budget presentation at Parliament on June 14, 2018. PHOTO | DIANA NGILA | NMG 

By JAMES NGUNJIRI

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Global rating agency Fitch has said the 2018/19 budget is consistent with its key debt assumptions but termed government’s growth forecasts and revenue projections as ambitious.

The budget targets a deficit of 5.7 per cent of GDP, which would be a considerable contraction from the 7.2 per cent estimated for the current financial year ending on Saturday.

Fitch said hitting the 2018/19 financial year deficit target would reverse the surge over the last five years, when an expansionary fiscal policies pushed the deficit to 8.9 per cent of GDP from 5.8 per cent and debt-to-GDP ratio by around 20 percentage points.

“The budget’s primary deficit target of 2.2 per cent of GDP is below the three per cent level that we believe would stabilise public debt,” said the agency.

“We still think consolidation efforts will bear fruit, but that government forecasts are slightly ambitious. Our 2018/19 financial year deficit forecast of 6.3 per cent reflects our slightly weaker growth forecast and the budget’s limited new revenue measures and reliance on improved tax administration to raise revenue performance.”