Struggling Kenya Govt Seeks KShs 14.4Bn More in Mini-budget for FY2019/20

The growth in Kenya's real GDP in 2020 contracted to -3 per cent as compared to the growth rate of 5.0 per cent in 2019

The government submitted to parliament a third Supplementary Budget for fiscal 2019/20, totaling a record Ksh 3,155,024.39, to implement additional measures to help people hit hardest by the coronavirus pandemic.

Leader of Majority Amos Kimunya tabled the supplementary estimates on Tuesday in which the Treasury is seeking to fund operations for the current financial year which ends on June 30.

According to Genghis Capital, the mini-budget intends to revise upwards National Government expenditure by Ksh 14.4 billion (0.14% of estimated FY19/20 GDP) of which recurrent is expected to increase by Ksh 8.9 billion while development spending is expected to increase by Ksh 5.5 billion.

“The expansionary Supplementary III is a negative surprise in light of our expected revenue underperformance in FY2019/20. Although Section 44 of the Public Finance Management Act is mum on the explicit number of Supplementary budgets in any given fiscal year, this third Supplementary budget has taken us into uncharted territory,” says Genghis in their FY2019/20 Supplementary Budget: Race against time… Topical Note.

Kenya Govt Seeks KShs 14.4Bn More in Mini-budget for FY2019/20
Source Genghis Capital

In the mini-budget, National Treasury has reallocated KSh2 billion for the procurement of the Covid-19 testing kits, face masks. KSh1.8 billion to the Transport Ministry for the Nairobi commuter train and KSh1.5 billion to the Interior Ministry for secure communication and surveillance systems.

The Ministry of Energy has been allocated KSh1.6 billion for the 435km Suswa-Loiyangalani power evacuation line.

Parliament has three sitting sessions (over a 2-day period) in the National Assembly calendar before the fiscal year comes to an end next Tuesday. 

With the tabling of the FY2019/20 Supplementary III, the Budget and Appropriations Committee is expected to table its report with recommendations after which the National Assembly is expected to approve the report. 

This then paves the way for Supplementary Appropriations Bill to effect the changes (this has to be before the end of the fiscal year for it to be meaningful).

According to Cytonn Investments, due to the depressed revenue collection with the revenue target for FY’2020/2021 at Kshs 1.9 trillion, they expect a higher budget deficit, which the Treasury estimates at 7.5 percent of GDP, creating uncertainty in the interest rate environment as additional borrowing from the domestic market will be required to plug in the deficit.

On the other and, NCBA Bank Research notes that “Under normal circumstances, Treasury has undershot its revenue target by an average of Ksh 168 billion in the last three years. This may be worse with elevated risks to the economy, potentially widening the deficit.”