Kenya to borrow Sh600billion from domestic market

National Treasury Cabinet Secretary Ukur Yatani addresses the media when he was presenting Survey on socio-economic impact of Covid-19 on households at his offices at the Treasury Building on July 9, 2020.

Sila Kiplagat | Nation Media Group

By  Peter Mburu

What you need to know:

• National Treasury has announced it would increase its total financing from an earlier planned Sh841 billion in the budget to Sh1,001.8 trillion.
• To raise the extra money, the government will be seeking about Sh600 billion in domestic financing, up from the Sh494 billion that had been planned for.

Continuing impact of Covid-19 on the economy has forced the National Treasury to review government’s spending for this financial year revising the figures upwards to a tune of Sh128 billion.

Treasury also announced it would increase its total financing from an earlier planned Sh841 billion in the budget to Sh1,001.8 trillion.

To raise the extra money, the government will be seeking about Sh600 billion in domestic financing, up from the Sh494 billion that had been planned for.

Treasury also raised the amount it will require through net external financing from Sh346.8 billion to Sh401.8 billion. Through its 2020 Budget Review and Outlook Paper (Brop), Treasury has said expenditure projections for the Financial Year 2020/21 will be revised through a supplementary budget to accommodate the weak revenue performance and ease funding pressures.

The outlook paper has revised expenditure and net lending for FY 2020/21 from Sh2.79 trillion in the budget to Sh2.919 trillion.

Recurrent expenditure was raised to Sh1.843 trillion up from budget figures of Sh1.826 trillion. The ministry said impact of the pandemic in the last quarter of FY 2019/20 had affected its projections for the current FY, necessitating additional cash injections to the budget.

Revenue shortfalls

“The fiscal performance of the FY 2019/20 budget was below target on account of revenue shortfalls and rising expenditure pressures. In particular, the revenue shortfalls in the fourth quarter of the FY 2019/20 was largely due to the severe disruptions on economic activities from the containment measures put in place to contain the spread of the Covid-19 Pandemic. In light of these developments, revenue projections for the FY 2020/21 budget will be revised appropriately,” National Treasury Cabinet Secretary Ukur Yatani said.

The CS said the fiscal deficit this year was projected at 8.9 per cent of GDP, a figure higher than the 7.5 percent of GDP in the budget estimates and the outcome of 7.8 percent of the GDP in the FY 2019/20 budget. 

Treasury maintains that the economy is projected to grow at 2.6 percent, and later recover to about 5.3 percent next year and about 5.9 percent over the medium term.