Kenya’s fiscal deficit is likely to stay at the budget estimate of 6.2 percent of gross domestic product (GDP) in 2022-23, according to Finance Minister Ukur Yatani.
The fiscal deficit estimated by the budget is Ksh 862.5 billion. This is equivalent to 6.2 percent of GDP in the financial year to July down from Ksh 1,024.3 billion equivalent to 8.1 percent of GDP in the FY 2021/22.
“The fiscal deficit will be financed through net external financing of Ksh 280.7 billion equivalent to 2.0 percent of GDP and net domestic financing of Ksh 581.7 billion equivalent to 4.2 percent of GDP,” Yatani told Parliament Thursday.
“Our medium-term fiscal consolidation policy targets to progressively reduce the level of fiscal deficit from Ksh 862.5 billion equivalent to 6.2 percent of GDP in FY 2022/23 to Ksh 634.1 billion equivalent to 3.2 percent of GDP in FY 2025/26.”
What is Fiscal Deficit?
The fiscal deficit of a country is calculated as a percentage of its GDP and for the current financial year – the shortfall in the government’s revenue compared to its expenditure or when the government spends beyond its income.
The fiscal deficit calculations are based on two components – Total receipts and Total Expenditure. The fiscal deficit is mainly financed through market borrowings. For this purpose, the government issues various instruments like Treasury Bills and Bonds.
Revenue Projections
The National Treasury projects total revenue collection including Appropriation-in-Aid and grants for the FY 2022/23 budget to be Ksh 2.4 trillion equivalent to 17.5 percent of GDP. Of this, ordinary revenue is projected at Ksh 2.14 trillion equivalent to 15.3 percent of GDP.
Expenditure Projections
Total expenditure in the FY 2022/23 is projected at Ksh 3.3 trillion equivalent to 23.9 percent of GDP.
Recurrent expenditures will amount to Ksh 2.2 trillion while development expenditures including allocations to foreign-financed projects, Contingency Fund, and conditional transfers to County Governments is Ksh 715.5 billion.
The fiscal deficit will be financed through net external financing of Ksh 280.7 billion equivalent to 2.0 percent of GDP and net domestic financing of Ksh 581.7 billion equivalent to 4.2 percent of GDP.
“The preferred debt financing are highly concessional loans offered at below-market interest rates with long repayment periods. Recourse to commercial borrowing has been maintained at minimum levels,” Yatani disclosed.
Kenya’s Finance Minister Presents KSh3.31 trn Budget for FY2022/23
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