FY 2022/2023 BUDGET: OPPORTUNITY FOR BOND INVESTORS.Published on 2022 | 05 | 11
A government budget is a document that presents a governing body's expected revenues and proposed spending for a fiscal year or budget year.
The National Treasury and Planning Cabinet Secretary Ukur Yatani read the 2022/2023 budget on April 7, 2022. This was based on what is called the budget policy statement, which outlined the policy measures that will continue to stimulate resilient and sustainable economic recovery in the short- and medium-term, 2022 to 2023. The Cabinet Secretary’s speech consisted of proposals on policy and tax measures to be included in the Finance Bill or the ‘Finance Law’ which was tabled in Parliament before April 30, 2022. This is a regulatory procedure and requirement designed to give MPs time to debate, review and propose changes.
After parliament has been given time to approve or reject the expected revenue and expenditure, it is assented by the President. Once it is passed, the proposals become law and therefore binding.
The FY 2022/23 budget was prepared under a revised budget calendar that considers the preparations for the 2022 elections.
Notable numbers from the budget policy statement
- The 2022/2023 overall budget hit Ksh3.32 trillion to be spent on 2.2 trillion government expenditure, 0.7 trillion for development and 0.41 trillion for counties. A large chunk of government expenditure will go towards debt repayment, at Ksh1.36 trillion up from Ksh1.15 trillion. Repayments of foreign debts will soar by 34.11 per cent to KES 440.06 billion, while repayments of domestic debts will go up by 11.65 per cent to KES 919.06 billion.
- The Government's debt position increased from KES 7.7 trillion as of 30th June 2021 to KES 8.2 trillion as of 31st December 2021. This was an increase of 6.6% in the first and second quarters of FY 21/22.
- Of this government debt, local borrowing through bills and bonds accounted for 48% while foreign borrowing through securities such as Eurobonds, commercial debt and concessional loans accounted for 52%.
- The debt increased by 15% from FY 2019/20 and is forecasted to reach KES 8.8 trillion and KES 9.8 trillion by June 2022 and June 2023, respectively, by the National Treasury.
- Kenya’s fiscal deficit as a share of GDP has expanded in tandem with the slow growth in revenue collection. Whereas expenditure as a share of GDP remained unchanged at about 25 percent between 2018/19 and 2020/21, the fiscal deficit as a share of GDP increased from 7.4 percent to about 8.6 percent.
Key take-outs from the numbers
The Government is currently running a fiscal and current account deficit.
Current account deficit means Kenya's imports are more than its exports. To counter this, the government relies on foreign investment inflows which balance off the negative current account deficit. However, as things are currently, there are not enough foreign investment inflows, which is also why there is a current account deficit.
The rise in the budget deficit is a key factor contributing to rapid public debt accumulation.
Government expenditure is expected to increase significantly in 2022 on account of several factors, some of which include:
the increase in debt repayment expenditures
the economic stimulus and ongoing infrastructure projects yet to be completed
election-related spending and increased expenditure demands for social services
implementation of a new manifesto by the new administration which is expected to play a greater role in the stickiness of the fiscal deficit over the medium term