Rotich ups this year’s debt tar­get to Sh631.5bn

Business Daily (Kenya) - - FRONT PAGE - Charles Mwaniki [email protected]­tion­

The Trea­sury has raised its bor­row­ing tar­get for the fi­nan­cial year end­ing June 2019 by Sh78 bil­lion in the wake of be­low-par rev­enue col­lec­tion in the five months to Novem­ber 2018.

Trea­sury sec­re­tary Henry Rotich says in the draft 2019 Bud­get Pol­icy State­ment (BPS) that the ex­ter­nal bor­row­ing tar­get for the cur­rent fis­cal year has in­creased by Sh34 bil­lion to Sh321.5 bil­lion.

Net do­mes­tic bor­row­ing is ex­pected to con­trib­ute Sh310 bil­lion, hav­ing ini­tially been set at Sh267 bil­lion in the June 2018 bud­get.

The new bor­row­ing tar­gets mean Kenya’s debt pile will grow by Sh631.5 bil­lion be­fore ac­count­ing for loans taken by other State agen­cies.

The in­crease of the ex­ter­nal bor­row­ing tar­get means that the Trea­sury is likely to tap the mar­ket for a large Eu­robond or syn­di­cated loan in the next few months, given that the gov­ern­ment also needs to raise funds to re­deem the ma­tur­ing $750 mil­lion (Sh76 bil­lion) five-year tranche of the 2014 Eu­robond is­sue.

On the do­mes­tic front, rais­ing the tar­get means in­creased com­pe­ti­tion for funds with the pri­vate sec­tor,

which is al­ready strug­gling to ac­cess bank loans due to the in­ter­est rate cap.

The Trea­sury says that it had by the end of Novem­ber al­ready bor­rowed a net of Sh139.4 bil­lion lo­cally and Sh77.1 bil­lion ex­ter­nally to finance the bud­get deficit that is ex­pected to stand at Sh635.5 bil­lion (6.3 per cent of GDP) this fis­cal year.

Kenya’s to­tal debt, whose sus­tain­abil­ity has raised con­cerns, is set to hit Sh5.67 tril­lion at the end of this fi­nan­cial year as per the BPS pro­jec­tions.

“In nom­i­nal terms, to­tal rev­enue col­lec­tion in­clud­ing Ap­pro­pri­a­tion in Aid (A.I.A) by Novem­ber 2018 amounted to Sh633.7 bil­lion against a tar­get of Sh677 bil­lion. The recorded short­fall of Sh43.3 bil­lion was due to un­der-per­for­mance in or­di­nary rev­enue of Sh27.7 bil­lion and A.I.A amount­ing to Sh15.6 bil­lion,” says the Trea­sury in the bud­get state­ment.

Mr Rotich says that ex­cise taxes and im­port duty came in be­low tar­get in the five months to Novem­ber, while in­come tax from cor­po­ra­tions recorded neg­a­tive growth.

In­come tax from em­ployed in­di­vid­u­als and VAT were how- ever on tar­get, and are ex­pected to re­main on pro­jec­tion in the sec­ond half of the fis­cal year.

KRA is ex­pected to im­prove its tax ad­min­is­tra­tion by en­hanced scan­ning of cargo at points of en­try into the coun­try and use of third party in­for­ma­tion and itax data to nab tax cheats and evaders. The con­tin­ued rev­enue un­der-per­for­mance cou­pled with ris­ing pub­lic debt has seen the gov­ern­ment come un­der pres­sure to cut its an­nual ex­pen­di­ture es­ti­mates.

Trea­sury pro­jec­tions for the 2019/2020 fi­nan­cial year are that the deficit will fall to Sh572.2 bil­lion or five per cent of GDP.

Ex­pen­di­ture is ex­pected to rise by 7.6 per cent to Sh2.7 tril­lion and to­tal rev­enue by 13.6 per cent to Sh2.08 tril­lion.

In the 2019/2020 fis­cal year, net do­mes­tic bor­row­ing is ex­pected to come down to Sh271.4 bil­lion, with for­eign bor­row­ing com­ing to Sh306.5 bil­lion.

The spend­ing plans will see the coun­try pump in Sh1.66 tril­lion into re­cur­rent ex­pen­di­ture in the fis­cal year that runs from July 2019 to June 2020, while de­vel­op­ment ex­pen­di­ture is pegged at Sh670.8 bil­lion.

Coun­ties’ ex­pen­di­ture is pro­jected at Sh371.6 bil­lion, with an ad­di­tional Sh5 bil­lion go­ing to­wards the con­tin­gency fund.


DEBT Trea­sury sec­re­tary Henry Rotich

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