Treasury sets belt-tightening target

The Government plans to cut State spending in the financial year starting in July to 23.6 per cent of Gross Domestic Product (GDP) from 26.0 per cent in the current fiscal year, the Finance Ministry said in its budget policy statement.

Belt-tightening measures will help the Government meet its target to reduce the fiscal deficit for the period to 4.9 per cent of GDP, down from 6.3 per cent for this fiscal year, the ministry said in the statement seen by Reuters on Tuesday.

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

The Treasury plans to borrow Sh222.9 billion locally to plug the budget gap and tap another Sh345.1 billion from foreign sources, the statement added.

President Uhuru Kenyatta’s government has been criticised by voters for borrowing heavily since coming to power in 2013, and his administration was forced to raise its borrowing ceiling last year after breaching initial targets. Kenya’s fiscal deficit, which peaked at 9.1 per cent of GDP in the 2016/17 financial year, has been exacerbated by higher spending on infrastructure projects including a new railway financed by China.

Fiscal gaps have been accompanied by the consistent failure of the Kenya Revenue Authority to meet the government’s lofty revenue collection targets.