Reviewing Kenya’s October fiscal performance

Kenya's fiscal policy performance for the month of October has shown both positives and challenges, as discussed by Churchill Ogutu, Head of Research at Genghis Capital. One of the key highlights was the equitable revenue share to counties increasing to $520 million, a positive development after a delayed county allocation revenue act. However, concerns remain as the basements for the months of July and August were addressed but those for September and October are pending. This delay could impact county budgets in the coming months. On the tax front, October saw receipts amounting to $1 billion, with a year-on-year increase of 13% and a month-on-month increase of 16%. These figures are affected by tax relief measures due to the pandemic, resulting in a cumulative shortfall of $960 million compared to projections for the financial year. The looming supplementary budget, estimated to increase spending by $1 billion while revenue decreases by $3.4 million, puts pressure on the National Assembly to make sound financial decisions. The IMF has raised concerns and discussions continue to ensure fiscal responsibility and alignment with international financial guidelines. Where Kenya faces a significant challenge is debt servicing costs, currently at 54% of targets, putting strain on budget execution. The government's strategy to address this concern is crucial for sustainable financial management. Despite these challenges, Kenya's net domestic borrowing remains on track, with 47% of the target already secured. The country is also exploring external borrowing options, including a Dutch IMF facility and a World Bank DPO, totaling $2.2 billion. Strategic borrowing and prudent financial management will be key to navigating Kenya's fiscal landscape going forward.