Kenya Proposes Ksh 2.91 Trillion FY2021 Budget With Reduced 4.9% Fiscal Deficit 

Kenya’s National Treasury has proposed a Ksh 2.91 trillion budget for the 2020/21 fiscal year with plans to cut state spending aimed at reducing the fiscal deficit for the period to 4.9% of gross domestic product (GDP), down from 6.3% GDP for the current fiscal year.

According to the Finance Ministry’s 2020 Budget Policy Statement (BPS) submitted to Parliament, together with the 2020 Medium Term Debt Management Strategy (MTDS), prioritize investments in the “Big Four” Agenda and are anchored on the Third Medium Term Plan (MTP III) (2018-2022) of the Kenya Vision 2030.

Ukur Yatani, National Treasury and Planning Cabinet Secretary says they are cognizant of our limited fiscal space occasioned by revenue shortfalls and rising expenditure pressures.

“To reverse this situation, the Government will continue to pursue the fiscal consolidation policy in order to provide and maintain the necessary balance between revenues and expenditures…In this regard, the fiscal deficit is projected to decline gradually from the estimated 6.3 percent of GDP in FY 2019/20 to 4.9 percent of GDP in FY 2020/21 and further to around 3.0 percent of GDP over the medium term,” he says.

“Revenues as a share of GDP are projected to remain at 18.4% in the medium term,” the ministry says. 

Revenue Projections

In the FY 2020/21 revenue collection including Appropriation-in-Aid is projected to increase to Ksh 2,134.1 billion (18.3 percent of GDP) up from the estimated Ksh 2,084.2 billion (20.1 percent of GDP) in the FY 2019/20.

Revenue performance will be underpinned by on-going reforms in tax policy and revenue administration. 

Ordinary revenues will amount to Ksh 1,856.7 billion (16.0 percent of GDP) in FY 2020/21 from the estimated Ksh 1,843.8 billion (17.8 percent of GDP) in FY 2019/20.

Expenditure Projections

While the Government expenditure is projected to decline as a share of

GDP to 23.6 percent, the overall nominal expenditure and net lending for FY 2020/21 is projected at Ksh 2,748.2 billion from the estimated Ksh 2,874.2 billion (27.7 percent of GDP) in the FY 2019/20 budget. 

The expenditures comprise of recurrent of Ksh 1,781.0 billion (15.3 percent of GDP) and development of Ksh 587.3 billion (5.0 percent of GDP).

Deficit Financing

Reflecting on the projected expenditures and revenues, the fiscal deficit (including grants), is projected at Ksh 571.2 billion (4.9 percent of GDP) in FY 2020/21 against the estimated overall fiscal balance of Ksh 657.4 billion (6.3 percent of GDP) in FY 2019/20.

The fiscal deficit in FY 2020/21, will be financed by net external financing of Ksh 345.1 billion (3.0 percent of GDP), Ksh 222.9 billion (1.9 percent of GDP) net domestic borrowing and other net domestic receipts of Ksh 3.2 billion.

Additional Information from 2020 Budget Policy Statement