BELT TIGHTENING

Kenya to cut budget deficit to 4.8% of GDP in 2020/21

The budget cuts will be brutal and sustained

In Summary

•Overseas trips by state officials that often involve lavish travel allowances are targeted.

•The government also plans to cut down on advertising.

Kenya will cut unnecessary expenditure including trips abroad by government officials in an effort to rein in a gaping fiscal deficit, the acting finance minister said on Thursday.

The budget deficit for the 2019/20 fiscal year (July-June) has been set at 5.6% of gross domestic product, down from 7.7% in the previous period.

 

Critics have accused the government of President Uhuru Kenyatta of ramping up borrowing at a rate that will saddle future generations with too much debt. The government defends the borrowing, saying it is required to fund infrastructure.

“The cuts will be brutal and will be sustained,” Acting Finance Minister Ukur Yatani told a meeting to plan the budget for the next fiscal year, adding that he expected the deficit to drop to 3.5% of GDP by the 2022/23 fiscal year.

“In the face of the slowdown in global growth, our government has adopted an all-inclusive fiscal consolidation policy package, encompassing fiscal, monetary, and financial policies,” he said.

Yatani singled out overseas trips by state officials - which often involve lavish travel allowances - and advertising by government departments - as examples of wasteful spending.

The finance ministry expects economic output to increase by 6.0% this year, the ministry’s principal secretary Julius Muia told the same meeting, slowing down from the 6.3% growth recorded last year.

“Our economy is fairly strong and resilient,” Muia said.

Muia said Kenya will reduce its budget deficit to 4.8% of GDP in its 2020/21 (July-June) fiscal year from 5.6% this financial year.

 He also told the meeting that economic growth will slow down to 6.0% this year from 6.3% in 2018.