- The government's expenditure is projected to grow to Sh4.21 trillion by the end of the fourth medium plan in 2027.
- The development budget is projected to be near Sh1 trillion by the end of the medium plan.
Image: FREDERICK OMONDI
Kenya is targeting to cut the budget deficit by five per cent in the next five financial years to 2026/27 in a bid to ease the debt burden.
According to the Fourth Medium Term Plan launched early this month by the National Treasury, the country has projected a budget deficit of 3.2 per cent in 2025/26 from the current 8.2 per cent.
The deficit is expected to drop gradually every financial year from 8.2 percent in 2021/22, 6.9 per cent in 2022/23 and 4.4 per cent in 2023/24. It is expected to drop further to 3.9 per cent in 2024/25 and 3.2 per cent in 2025/26.
The drop is set to lower the debt dependency that has seen Kenya's public debt skyrocket to above Sh8.2 trillion.
''We project to cut annual debt financing to below Sh700 billion within the medium plan,'' National Treasury said.
The plan shows the country is expected to cut debt financing from Sh846.1 billion in the next financial year to Sh682 billion in 2023/24. This is set to drop further to Sh670 billion in 2024/2025 financial year and Sh627.5 billion in 2025/26.
Treasury has indicated that it will look more inward in regards to borrowing, with domestic loans expected to account for over 80 per cent of the planned new borrowings.
According to the report, the country will borrow externally Sh125.5 billion and Sh502.1 billion in 2025/26. This is a departure from a trend where external loans have always exceeded domestic ones.
Even so, the government's expenditure is projected to grow to Sh4.21 trillion by the end of the fourth medium plan up from Sh3.32 trillion in the financial year starting July 1.
The state is expected to spend at least Sh3.15 trillion in the current fiscal year.
Of this, the recurrent budget is set to expand systematically from Sh2.2 trillion in the upcoming financial year to a high of Sh2.8 trillion in 2025/26. It will increase from Sh2.35 trillion in 2023/24 to Sh2.56 trillion in the following financial year.
The development budget is projected to be near Sh1 trillion by the end of the medium plan.
Projected data by the National Treasury shows it will grow by Sh300 billion from the current Sh667.7 billion to Sh962.3 billion by the end of the five-year plan to 2027.
The budget share to counties is expected to increase to Sh442.5 billion in the next five years compared to Sh409.9 billion projected in the current financial year.
This is not the first time the country is setting ambitious budget plans and deficits.
The exchequer is expected to slash the budget deficit to close to three per cent in the medium plan ending June 30.
According to the third medium plan, the government had projected to cut the budget deficit from 7.54 per cent in 2016/17 to 3.8 per cent in 2021.
Even so, the country has been recording deficits above seven per cent during the period. National Treasury data shows it recorded a deficit of 7.02 per cent in 2018, 7.35 per cent in 2019 and 8.05 per cent in 2020.
Various bodies have in the past blasted Kenya for not sticking to its budget plan, forcing the International Monetary Fund (IMF) to intervene since 2018.
It has intervened severally, pushing for domestic revenue mobilisation in a bid to help the country ease dependency on debt to finance the budget.
'' We are closely monitoring Kenya's fiscal plan with the view of even as the country work on lifting its economy from Covid-19 crisis,'' IMF said in the last review in December last year.
The Institute of Economic Affairs (IEA) on other hand wants the National Treasury to move its 'impressive' fiscal plans from the paper.