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Kenya to boost 2015/16 spending by 10 percent, says finance ministry

Kenya will increase spending by 10 percent in the 2015/16 fiscal year (July-June) to 1.849 trillion shillings ($20.5 billion), the finance ministry said on Tuesday.

The Treasury said in a pre-budget presentation the government planned to borrow 141.2 billion shillings from the domestic market to partly plug a predicted budget deficit of 6.8 percent of gross domestic product (GDP).

The budget deficit is 7.8 percent in 2014/15, to be partly funded by borrowing 101.7 billion shillings on the local market.

Net external financing, usually a mix of grants and loans, would rise to 289.6 billion shillings from 193.3 billion shillings in 2014/15.

The presentation showed overall government spending rising to 2.24 trillion shillings in 2017/18. The government expected to collect 1.16 trillion shillings in taxes in 2015/16, from 1.01 trillion shillings in the current fiscal year.

Kenya borrowed from international capital markets for the first time this year, raising $2 billion from its maiden sovereign bond in June, to take some pressure off local markets and lending rates.

Last week, it raised an extra $750 million through a tap sale of its debut Eurobond.

The Treasury's presentation predicted the economy would expand by 7 percent in the 2015/16 financial year, from a projected 6.1 percent this fiscal year, and 7.1 percent in 2016/17.

Finance Minister Henry Rotich said last week the economy was projected to grow by 6.5 percent in calendar year 2015, rising to 7 percent in 2017.

The Treasury expects the economy to grow by 5.3-5.5 percent this calendar year.

Risks to growth included the effects of insecurity on tourism and poor rainfall, which could hurt exports and agricultural production, the finance ministry said.

Bomb and gun attacks by the Somali militant group al Shabaab have hurt the east African nation's tourism industry, one of the main sources of hard currency.

($1 = 90.3500 Kenyan shillings)