Kenya Raises 2023/24 Budget Deficit Forecast

Kenya has raised its budget deficit forecast for the 2023/24 (July-June) financial year to 5.3% of GDP from 4.4%, a summary of revised spending estimates presented to parliament showed on Friday.

The wider projection was due to the weakening of the Kenyan shilling against the dollar, Finance Minister Njuguna Ndung’u said, which drove up the projected amount of cash required to repay foreign debts during the period.

“The data we have has shown that approximately 145 billion shillings is accounted by increased interest costs on the external debt space as well as debt volume increase due to exchange rate depreciation,” he told Reuters.

A $2 billion Eurobond due next June is among the foreign currency denominated debt the government has to pay. The maturity of that bond has caused some concerns among investors after a surge in yields kept the refinancing option out of reach.

President William Ruto’s government had slashed the budget deficit sharply in June when it first presented it to parliament, as it sought to reassure markets that it was serious about reining in ballooning debt.
But a steep weakening of the shilling, which is down 18% against the dollar this year so far, has frustrated that effort.

“(It is) Time to drop politics and look at the reality in the world economies,” Ndung’u said.

Reuters/Aluko Jane