Kenya Sets FY2019/20 Budget Deficit to 5.0pc Starting July

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National Treasury CS, Henry Rotich

Kenya’s National Treasury has projected an overall budget deficit of 5.0% for the 2019/2020 fiscal year from a revised deficit of 6.3% of GDP in the 2018/19 fiscal year according to Draft 2019 Budget Policy Statement.

“The deficit is projected to decline from 7.2% in FY 2017/18 to 6.3 in FY 2018/19 and further to 3.0% of the GDP in FY 2022/23,” said Treasury.

Henry Rotich, the Treasury CS says, “The fiscal policy in this BPS targets to support rapid and inclusive economic growth while ensuring a sustainable debt position and lower fiscal deficits.”

The BPS is themed ‘Harnessing “The Big Four” Plan For Job Creation And Shared Prosperity’.

As a result of the fiscal consolidation efforts, Treasury says the nominal public debt on a net basis (as a percentage of GDP) will reduce from the preliminary 51.5% of GDP in the FY 2017/18 to 43.3 percent in the FY 2022/23. “This will be achieved by putting more emphasis on the efficiency and effectiveness of public spending and improving revenue performance.”

The budget policy statement (BPS) is a Government policy document that sets out the broad strategic priorities and policy goals that will guide the national government and the County Governments in preparing their budgets both for the following financial year and over the medium term.

Kenya Fiscal Consolidation Path, Fiscal Deficit a percent of GDP

Revenue Projections

In the FY 2019/20 revenue collection including Appropriation-in-Aid (A.i.A) is projected to increase to Ksh 2,080.9 billion (18.3 percent of GDP) up from Ksh 1,831.5 billion (18.3 percent of GDP) in the FY 2018/19.

This revenue performance will be underpinned by on-going reforms in tax policy and revenue administration. Ordinary revenues will amount to Ksh1,877.2 billion (16.5 percent of GDP) in FY 2019/20 up from Ksh 1,651.5 billion (16.5 percent of GDP) in FY 2018/19.

Expenditure Projections
Overall expenditure and net lending for FY 2019/20 are projected at Ksh 2,704.7 billion (23.8 percent of GDP) from the estimated Ksh 2,514.4 billion (25.1 percent of GDP) in the FY 2018/19 revised budget.

These expenditures comprise among others, recurrent of Ksh 1,657.3 billion (14.6 percent of GDP) and development of Ksh 670.9 billion (5.9 percent of GDP).

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Deficit Financing
Reflecting the projected expenditures and revenues, the fiscal deficit (excluding grants), is projected at Ksh 623.8 billion (equivalent to 5.5 percent of GDP) in the FY 2019/20. Including grants, the overall fiscal deficit is projected at Ksh 572.2 billion (5.0 percent of GDP) in FY 2019/20 against the estimated overall fiscal balance of Ksh 635.5 billion (6.3 percent of GDP) in FY 2018/19.

The deficit excluding SGR related expenditures in the FY 2019/20 is projected at 4.6 percent of GDP lower than the projected 5.3 percent of GDP in FY 2018/19.

The fiscal deficit in FY 2019/20, will be financed by net external financing of Ksh 306.5 billion (2.7 percent of GDP), Ksh 271.4 billion (2.4 percent of GDP) net domestic borrowing and other net domestic receipts of Ksh 5.7 billion.