Kenya projects to cut its fiscal deficit to 3.6 percent of GDP

Kenya projects to cut its fiscal deficit from the current 5.8 percent of the gross domestic product (GDP) to 3.6 percent in the financial year 2025/26, the Central Bank of Kenya (CBK) said on Thursday.

This would be done through increased collection of taxes and reduction in borrowing from both external and internal sources, according to the apex bank.

“The fiscal consolidation path over the medium-term is expected to reduce the growth of public debt and boost debt sustainability position,” the CBK said in a statement released in the Kenyan capital of Nairobi.

The consolidation is currently ongoing, with the government having instituted various tax reforms to shore up revenue in the financial year 2023/2024.

While presenting budget estimates in the National Assembly on June 15, Cabinet Secretary for National Treasury and Economic Planning Njuguna Ndungu said the government intends to collect 2.9 trillion Kenyan shillings (about 20.6 billion U.S. dollars), which comprise 17.9 percent of the GDP as well as receive 302 million dollars in grants.

This will, therefore, leave the country with a 5.13-billion-dollar deficit, which is equivalent to 4.4 percent of the GDP.

The deficit is projected to decline to 3.9 percent in the financial year 2024/25 before declining to 3.6 percent in 2025/2026.

Analysts expect the consolidation to help Kenya manage its public debt, which currently stands at 66 billion dollars, with most of it (52 percent) being from external sources. Enditem