NAIROBI, Kenya, Feb 26 – The International Budget Partnership (IBP) Kenya has urged the government to tame fiscal deficit as well as manage borrowing during the 2024–25 financial year (FY).
IBP Kenya Country Manager Abraham Rugo noted that the big budget deficit gap poses a great concern to the nation, which is still struggling to pay its public debt.
The 2024 Budget Policy Statement (BPS) proposes a decrease in fiscal deficit, excluding grants, from Sh761.1 billion in the 2023–24 FY to Sh753.2 billion in the current FY, which is a one percent decrease in absolute terms.
“This is good news! Our concerns are that the fiscal deficit continues to be one of the challenges to the current financing framework because the more the fiscal deficit continues to grow the more it affects the country’s borrowing,” said Rugo.
He noted that the intended decrease in the deficit is in line with the fiscal consolidation efforts to narrow the fiscal deficit, including grants, to 3.9 percent of the country’s gross domestic product (GDP) in the 2024–25 FY.
The 2024 BPS that is currently before parliament indicates that the budget deficit for FY 2024–25 will be met through more domestic borrowings than external financing, contrary to the medium-term debt strategy.
Rugo pointed out that the government is still eyeing external financing in order to service its debt despite forex fluctuation risks due to the high interest rate exposure of domestic borrowings.
“The BPS 2024 indicates that the Budget deficit for FY 2024/25 will be achieved through 53 percent of domestic borrowings totaling to 377.7 billion than Sh 326.1 billion External financing,” he said.
At the end of December 2023, Kenya’s public debt stock stood at Sh11.14 trillion, with domestic and external debt stocks accounting for 45.3 percent and 54.7 percent, respectively.
In FY 2024–25, the government targets collecting Sh2.948 trillion as revenue.
The target is a 15 percent increase over the targeted revenue collection in the 2023–24 FY, equivalent to Sh377 billion.
“The revenue is expected to grow in 2024/25 Financial Year by a 15 percent increase of ordinary revenue collected through various taxes,” added Rugo.
