Kenya’s Finance Ministry Expects Heavy Government Spending in 2019 as Country Takes on Ambitious Development Projects

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Kenya’s Finance Ministry is projecting heavy government spending in the 2019-2020 financial year as the country undertakes a series of ambitious development projects.

The nation, often touted as East Africa’s largest economy, is set to further develop its infrastructure through a series of railway, road and port development projects. The strategy is in line with Kenyan President Uhuru Kenyatta’s Big 4 development agenda, an ambitious plan that seeks to grow the country’s economy, create jobs and improve the livelihoods of millions of people.

The Big 4 Agenda seeks to give Kenyans improved access to affordable housing and healthcare, while boosting food security and developing the country’s manufacturing industry.

In a statement issued this week, the East African Nation’s Ministry of Finance said Kenya’s overall spending would rise to Ksh2.7 trillion ($26.56 billion) in 2019/20 from a revised Ksh2.51 trillion (about $25 billion) in the previous fiscal year.

At the same time, Kenya 2019/20 budget deficit is forecast to fall.

These developments were outlined in a draft budget policy statement, in which the Ministry said Kenya’s budget deficit would drop to 5% of gross domestic product (GDP) in the period from July to June, from a revised deficit of 6.3% of GDP in the 2018/19 fiscal year.

The deficit was forecast to fall further to 3% of GDP in 2022/23.

To cover the deficit, the government will borrow Ksh271.4 billion ($2.67 million) from the domestic market in 2019/20 and 306.5 billion shillings from foreign sources, the ministry said.

The East African nation’s government increased borrowing and spending recently, leaving it with a fiscal deficit that peaked at 6.8% in the fiscal year ending in June, 2018.

In fact, the International Monetary Fund (IMF) said in October that Kenya’s risk of defaulting on debt repayments had increased to moderate from low, citing the government’s public investment drive and revenue shortfalls in recent years.

Henry Rotich, the country’s Cabinet Secretary for the National Treasury, says the government will look for loans in a bid to effectively fund its projects.

In 2019, Kenya already plans to repay some of its existing loans. It recently emerged that Kenyan taxpayers will pay close to Ksh100 billion ($1 billion) in interest on foreign loans while clearing the country’s maturing debts. Which are estimated at Ksh380 billion ($3.8 billion).

Nonetheless, Kenya’s government is hopeful that despite these challenges, the country will be able to fund its projects.

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