Kenya plans 5% budget increase belying Ruto’s vow to cut spending
Kenya plans a 5% increase in spending for the current fiscal year, a move at odds with the president’s vow to slash budgets in the East African nation amid mounting economic challenges.
The Treasury is asking lawmakers to approve a budget increase to 3.93 trillion shillings ($26.1 billion) for the year to end-June to spend more on debt repayment, salaries and pensions, Cabinet Secretary Njuguna Ndung’u said in supplementary estimates presented to the National Assembly. On the other hand, it plans to reduce development spending.
That will see the financing shortfall balloon to 5.3% of gross domestic product from the 4.4% originally approved, undermining efforts to reduce the budget deficit toward a 3.6% medium-term target.
Earlier this month, President William Ruto said he’d directed ministries to slash spending plans by 10% to “align expenditures with available resources amidst the global economic stress.”
East Africa’s biggest economy faces a growing debt pile and few attractive refinancing options. Its currency is down 18% against the dollar this year, making foreign loan repayments more expensive and stoking inflation. The yield on the nation’s Eurobonds due next year dropped 62 basis points to 14.912% by noon in the capital, Nairobi.
As part of an International Monetary Fund program, the government is pushing to boost revenue collection, which has curbed demand. The Treasury said revenue in the first three months was 586.1 billion shillings, 11% short of its target.
The Trade and Development Bank is arranging as much as $1 billion in financing, with $500 million expected next month, Nairobi-based Business Daily has reported. An upcoming IMF review for about $3.5 billion of facilities could unlock more disbursements.
