Kenya plans to borrow more this financial year to fund additional budget needs in the revised budget for 2020/21.
According to the 2020 Budget Review and Outlook Paper tabled by National Treasury Cabinet Secretary Ukur Yatani in parliament, the country will borrow Sh1.002 trillion in the current financial year to meet the additional Sh200 billion expenditure.
In the new budget plan, the exchequer has raised expenditure for the year to Sh2.92 trillion up from Sh2.76 trillion even after acknowledging an expected shortfall in ordinary revenue collection due to the Covid-19 shocks.
The BOP shows that treasury has lowered expected collection by the Kenya Revenue Authority (KRA) to Sh1.6 trillion from Sh1.63 trillion set in June.
“In this regard, revenue projections for 2020/21 have been revised, taking into account the outcome of the 2019/20 where revenue falls short of the target by Sh131.2 billion, “Treasury said.
This, it says, resulted from the containment measures against Covid-19 on economic activities and tax relief measures implemented to cushion citizens against the adverse impact of the pandemic and increase liquidity.
Subsequently, the total revenue for the year including Appropriations- in -Aid has been revised downward to Sh1.86 trillion compared to Sh1.89 announced in January.
Out of the expended total expenditure of Sh2.91 trillion, a massive Sh1.84 trillion will go to the recurrent budget, which has increased by Sh17 billion while the development budget has gone up by Sh85.5 billion to Sh675.2 billion.
Similarly, allocations to Counties are set to grow to Sh395.2 billion from Sh369.2 billion after the exchequer carried forward arrears amounting to Sh26 billion from the equitable share in the last financial year.
To seal the budget deficit of Sh1.058 trillion, the National Treasury is expected to borrow Sh401.8 billion externally up from Sh346.8 billion and a further Sh600 billion domestically from the originally amount of Sh494.3 billion.
According to BOP, Kenya is targeting a new loan from the World Bank worth Sh150 billion under the Development Policy Operations (DPO) and Sh249.1 billion in project-specific loans.
The country had in June planned to borrow Sh841 .1 billion to fund the budget deficit for the current financial year.
The move to borrow more to fund the budget is likely to push the country’s total debt to Sh7.68 trillion by end of the financial year, with BOP estimating an external debt of Sh3.91 trillion and domestic debt at Sh3.77 trillion.
The country’s total debt is currently at Sh7.06 trillion according to the Central Bank of Kenya.
President Uhuru Kenyatta’s regime continues to accumulate debt despite local and international concerns.
In May, the IMF raised Kenya’s risk of debt distress to high from moderate due to the impact of the coronavirus crisis.
The lender asked the country to cut unnecessary expenditures to ease pressure on the debt obligation.
Other credit rating agencies including Moody’s, Standard and Poor’s (S&P) and Fitch Rating have also raised concern about the country’s rising debt, with all downgrading the country’s creditworthiness.
Early this week, the Business Daily reported that Kenya has requested another loan from the International Monetary Fund (IMF), less than six months after receiving $739 million (Sh79.3) billion in May from the lender to respond to the economic shocks caused by Covid-19.