State targets the rich to shore up revenues

The Government will look at ways to enforce a capital tax gains as it seeks to shore up revenues in the face of ever-growing demands for cash to fund an expanded government and development projects, Treasury secretary said on Thursday.

Henry Rotich said the government had initiated a review of the capital gains tax to formulate ways for its effective enforcement.

"This will allow wealthier members of our society to also make a token contribution toward our national development agenda," he told lawmakers in his budget speech for the 2013/14 fiscal year.

(Read: Experts propose the return of capital gains tax)

In the budget, the minister set the fiscal deficit at 7.9 per cent of the gross domestic product or Sh329.7 billion ($3.86 billion), slightly higher than markets expected.

He said the gap would be filled by net foreign financing of Sh223 billion and Sh106.7 billion net borrowing from the domestic market.

Razia Khan, Africa analyst at Standard Chartered in London said the deficit was on the high side of expectations, even though the announced spending was broadly in line with consensus expectation.

"Despite the scaling up of foreign financing of the budget, the domestic borrowing requirement will not fall very significantly," she said.

Rotich said the government expects 2013 growth at 5.8 per cent rising to over 7 per cent in the medium term, from 4.6 per cent in 2012.

Inflation was expected to remain around 5-7 per cent target over the period ahead. Kenya's inflation rate fell to 4.05 per cent in the year to May.