The Treasury has again raised the domestic borrowing target for the current financial year on the back of lower-than-projected tax collections, hitting the plan to slash fresh debt by Sh273.7 billion.
Revised estimates in the Kenya Gazette show the Treasury has now set sights on tapping Sh471.4 billion from the domestic market to plug a hole in President William Ruto’s nearly Sh3.9 trillion first full-year budget.
The new borrowing goal is Sh56.1 billion more than the Sh415.3 billion that the Treasury had projected in September through the Budget Review and Outlook Paper (BROP).
This marks the second time the Ruto administration has raised the target since lowering it to Sh313.7 billion at the beginning of the current fiscal year in July from Sh587.4 billion approved by lawmakers in June.
The difference was to be compensated by increased net borrowing from foreign lenders where it initially raised its target more than two and a half folds to Sh464.2 billion from Sh131.5 billion original estimates.
The net foreign borrowing target was later lowered to Sh448.7 billion in the BROP document.
The Central Bank of Kenya, the government’s fiscal agent, said at the time the reduced borrowing in the domestic market would help cool pressures on interest rates.
The cut in local borrowing was further expected to help increase dollar inflows and slow down the weakening of the shilling due to a gaping mismatch between supply and demand for the international reserve currency.
“We believe that with that reduced domestic borrowing, we will see a reduction in the pressure on interest rates,” CBK Governor Kamau Thugge told a press briefing August.
