KENYA COMMITS TO CAPPING BUDGET DEFICIT AT 3.0 PCT TO RECIVE IMF LOANS

Kenya has committed to trim its budget deficit and implement a set of austerity measures to access funding from the International Monetary Fund, says National Treasury Cabinet Secretary (Minister) Henry Rotich.

Kenya has committed to reducing its deficit to 3.0 per cent of gross domestic product (GDP) in the medium term, maintaining inflation at below 6.0 per cent and increasing funding to priority areas, he added here Wednesday.

The Visiting IMF Deputy Managing Director, David Lipton, has told the government that the IMF was satisfied with measures being put in place by the government to encourage investments and economic growth.

However, the growing recurrent and development expenditure and thinning revenue collection have pushed Kenya’s national budget deficit to the current level of 8.0 per cent of GDP.

The government has set a budget deficit target of 6.0 per cent in the short term and this has made the National Treasury to embark on a borrowing spree, raising Kenya’s loan portfolio to 46 per cent of GDP.

This has raised fears that the country is living beyond its means, which poses serious economic risks. The IMF has voiced concern over Kenya’s widening budget deficit saying this is likely to overheat the economy.

Lipton says Kenya needs to reform its tax regime to mobilize more resources, and re-organize its revenue management in order to direct her resources to priority areas. “In particular, it will be important to undertake a growth-friendly reduction in fiscal deficits over the medium term to maintain debt sustainability and reduce external current account deficits,” he said in a statement.

Rotich told Lipton that Kenya would strive to cut its deficit to around three per cent in the medium term while at the same time reduce domestic and external borrowings.

Already the governments has frozen hiring and pay hikes in the public service and Treasury has further shelved expenditure on new infrastructure projects until old projects are completed.

In March this year, the Fund approved Kenya’s application for a 151 billion-shilling (1.5 billion US dollars) precautionary credit facility

Source: Nam News Network