Speaking during the launch of the FY2023/2024 Annual National Shadow Budget in Nairobi on April 12, 2023, the Institute of Public Finance (IPF) blamed the Kenya’s economic woos on poor fiscal discipline.
It is worth noting that Kenya’s economy is headed for a tougher run due to a growing burden of debt servicing, the government’s inability to implement austerity measures and a worsening global economic slowdown.
The caution from economic experts is coming at a time the government is struggling to pay civil servants amid low revenue collection, bloated wage bill and ballooning public debt.
The country is expected repay the 10-year Eurobond whose issuance in 2014 signaled the Jubilee administration’s turn to commercial debt to fund the budget.
The Kenyan economy is on its knees. Kenya Revenue Authority is likely to miss its collection target, FX reserves are way below the threshold and the shilling is drastically depreciating against the dollar.
Read: High Eurobond Yield Piles Pressure on Kenya Debt Servicing
Both the exchequer and international lenders like International Monetary Fund and World Bank have already downgraded this year’s growth to 5.8 percent from 6.1 percent.
On Tuesday, IMF slashed the global growth forecast to 2.8 percent from 3.4 percent triggered by the pandemic and political tensions.
The mismatch between the government promises and the budgetary allocation to the priority areas is worrying. For instance, the National Treasury proposes a 12 percent and 0.3 percent reduction in allocation for the Agriculture, Rural and Urban Development (ARUD) and Social Protection, Culture and Recreation (SPCR) sectors respectively in the FY2023/2024 Budget estimates, compared to the FY2022/23 Supplementary I Budget allocations.
It is worth noting that the agriculture sector, which employs more than 40 percent of the total population and 70 percent of the rural population, does not seem to receive the attention that it deserves.
Also, the government needs to institute appropriate measures to streamline operations in the Kenya Revenue Authority (KRA) to meet its revenue collection targets. Failure to do this may lead to above target fiscal deficit and a rising debt burden.
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