The National Treasury is expected to borrow Ksh.1 trillion in the current financial year ending on June 30, 2021 following upward adjustments to spending.
The higher borrowing ceiling cited as part of Supplementary 1 budget estimates to be presented next month to Parliament affirms a similar outlook contained in the 2020 Budget Review and Outlook Paper (BROP).
According to the supplementary estimates revealed in the draft 2020 Budget Policy Statement (BPS) government spending will rise by Ksh.103.4 billion to Ksh.2.88 trillion from an originally approved Ksh.2.77 trillion.
This to include a Ksh.21.5 billion upward adjustment to recurrent expenditures which will now rise to Ksh.1.85 trillion and a Ksh.52.2 billion rise in development spending to Ksh.641.9 billion.
Meanwhile, country transfers will be increased by Ksh.29.7 billion to Ksh.383 billion.
Net foreign financing is set to be adjusted to a higher Ksh.427.5 billion while net domestic financing will level up to Ksh.572.7 billion.
The upward adjustment in borrowing is attributable to declining revenues with the exchequer having adjusted targets on expected collections to Ksh.1.829 trillion to include Ksh.1.574 trillion in ordinary revenues and Ksh.255.2 billion in ministry appropriations.
According to the exchequer, revenue collection to December 2020 declined by 14 per cent to Ksh.800.1 billion inclusive of ministerial appropriations in aid on the back of difficulties occasioned by the COVID-19 pandemic.
This to include Ksh.75.8 billion in missed ordinary revenue collections (tax + non tax income) and Ksh.31.8 billion in ministerial aid shortfalls.
So far, the National Treasury has Ksh.362.6 billion to include Ksh.345.4 billion in net domestic borrowing and Ksh.17.2 billion in net foreign financing.
This implies that Kenya will now take up Ksh.637.4 billion in new borrowing between now and June to plug the budget hole.
Kenya will be betting on concessional funding from programs by the World Bank and the International Monetary Fund (IMF) to complete its desired net foreign financing.
Domestically, the exchequer is expected to find sheltering in bloated appetites by investors for government securities to round off the annual domestic borrowing program by June.
Greater spending against falling revenues is expected to leave the fiscal deficit at an equivalent nine per cent of Gross Domestic Product (GDP) by June.
The deficit is however projected to decline to Ksh.662.1 billion or 3.6 per cent of GDP by June of 2025 on the back of expected improvements in revenue collections.