Kenya may borrow more after court, MPs suspend taxes

The government could be forced to borrow more than initially budgeted for to bridge a gap left by the suspension by courts and Parliament of collection.
Analysts at Genghis Capital, an investment bank, said the suspension by the High Court decision would also make it difficult to carry out the fiscal consolidation – effective reduction of the budget deficit and overall public debt – that is currently a major Treasury target.
It is also a key requirement in Kenya’s ongoing efforts to convince the International Monetary Fund to keep in place the Sh150 billion forex insurance facility. The Treasury had expected to give a boost to revenue collection by invoking a legal provision that allows it to raise cash from new tax measures even before the Finance Bill is passed by Parliament.
But the High Court suspended the implementation of the measures while Parliament also slammed breaks on the attempt to raise Sh3.6 billion from cosmetics, bottled water and other non-alcoholic drinks.
“The suspensions will dent Treasury’s effort in raising Sh1.95 trillion (17.5 per cent year-on-year) in the fiscal year. A greater concern is that fiscal consolidation (Fiscal Year 2018/19 fiscal deficit target of 5.70 per cent) will be dampened as the government will be forced to rev up its borrowing,” said Genghis Capital.

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During the presentation of the 2018/19 Budget Statement, Treasury secretary Henry Rotich said the total deficit would stand at Sh558.9 billion with foreign funding at Sh287 billion and domestic borrowing at Sh271.9 billion.
This plan was intended to keep the Budget deficit at 5.7 per cent but further borrowing will breach this limit.
Kenya has made use of the local and international markets. Early this year, it borrowed Sh200 billion from the international bond markets but has also used syndicated loans from global banks.