Central Bank Governor Patrick Njoroge has urged the Government to consider alternative ways of financing its ever-widening budget deficit, warning against more borrowing.
While insisting that the country’s public debt is still within control, he warned yesterday that more unchecked borrowing could put the economy at risk.
“The concern is whether the fiscal deficit is manageable. The target is to lower the budget deficit gradually to three per cent of GDP,” said Dr Njoroge (pictured) after meeting Uasin Gishu Governor Jackson Mandago in his office in Eldoret.
Public debt currently stands at Sh5.3 trillion amid shrinking revenues which has forced the National Treasury to borrow to bridge the budget deficit.
Njoroge proposed the adoption of a non-debt approach to financing the shortfall in the national budget, saying this was the only sustainable way of running the economy.
Central Bank data for February showed that Kenya’s foreign debt stood at Sh2.6 trillion which is about half of the Sh5.3 trillion total public debt.
The Central Bank boss said Kenya’s economy is predicted to grow by 6.3 per cent this year, up from 6.1 per cent last year.
Much of the growth is expected to come from the services sector, including tourism, agriculture and manufacturing which have so far recorded significant growth.
On the recent court ruling that the law capping interest rate is unconstitutional, Njoroge said the regulator would ensure that commercial banks do not overcharge borrowers in absence of the controversial legislation.
“We are working with commercial banks to ensure that we don’t go back to the old regime. We have to move to more customer-centred banking services,” said the governor who was accompanied by the CBK board members.