Treasury says 2019/2020 budget deficit stands at Ksh 607 billion

Written By: Regina Manyara-Gitau
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Budget
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The government will be seeking to raise 607 billion shillings to plug the budget deficit in the 2019/2020 financial year.

A statement from the parliamentary budget office indicates that the government plans to raise 324.3 billion shillings through external sources while net domestic borrowing will account for 289.2 billion shillings.

This comes in the wake of calls by analysts to rein in on public debt.

According to the draft Budget Statement 2019-20, external financing is expected to play a greater role in deficit financing at 53% and 47% of the budget deficit, respectively.

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In comparison to 2018/19 financial year, the framework increases external borrowing by 13% and domestic borrowing by 12%.

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As such the country is expected to incur interest of 290.5 billion shillings on domestic debt and a further 150.9 billion shillings on external loans during the next financial year that starts in July.

This is despite a drop in public debt servicing costs, by 20% to 696.6 billion shillings, accounting for 86% of total Consolidated Fund Services that primarily relate to public debt, pensions and salaries of constitutional offices.

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Kenya sources most of her infrastructure funding from China, that has trounced traditional lenders from Europe to become the country’s most reliable financial partner.

China will take the lion’s share of interest arising from external loans, with China Exim Bank gobbling up 37.8 billion shillings and China Development Bank 4.7 billion shillings. China leads in the list of external creditors by 22 percent followed by World Bank at 20 percent.

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In the medium term Italian, French and China debt will be the largest influencers of public debt financing expenses.

In particular, maturing Chinese debt will reach 70.8 billion shillings in the 2021/22 financial year and be the main factor behind the rise of consolidated fund services expenditure to 1 trillion shillings.

The first five-year tranche of 200 billion shillings Eurobond taken in 2014 that matures in July will attract interest of 14.5 billion shillings. The state will also incur interest of 40 billion shillings for undisclosed ‘new loans.’

 

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