Kenya's budget deficit as a proportion of gross domestic product (GDP) is forecast to widen before recovering at a later date when economic performance rebounds.
A drastic scale-back on expenditure could help cushion Kenya’s economy from further knocks when the country concludes its long-drawn electioneering period, a UK-based institute of accountants has said.
The Institute of Chartered Accountants in England and Wales (ICAEW) said the country’s budget deficit as a proportion of gross domestic product (GDP) is forecast to widen before recovering at a later date when economic performance rebounds.
“A start would be to rethink the regulatory cap on commercial interest rates, which has starved small and medium enterprises of funding. Reining in expenditure in order to ensure government debt does not get out of hand, would improve the economy’s future prospects” the institute said in a report published on Thursday.
“Furthermore, the newly elected government will need to lead the charge against corruption,” it added.
The country is scheduled to hold repeat Presidential polls on October 26 almost two months after it held its General Election on August 8.
The presidential election results were annulled by the Supreme Court on September 1 over irregularities.
The country’s budget has been growing, with total expenditure at an average of 14.7 per cent to Sh2.2 trillion in the 2016/2017 fiscal year from Sh977 billion in the 2010/2011 financial year. This implies that the difference has been funded through borrowing.
This has led to an increase in debt level from 40.7 per cent debt to GDP in 2011 to the current level of 54.4 per cent, which is 440 bps (basis points) above International Monetary Funds’ (IMF) threshold for developing countries.
But the Treasury in the latest estimates indicated that it has raised targets for the Kenya Revenue Authority (KRA) in the next financial year in order to stabilise its debt and consolidate economic growth.
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