East Africa’s top economy is targeting a budget deficit of 6.9 per cent of GDP in the 2016/17 fiscal year (July-June), compared with a revised 8.1 per cent this year, the Ministry of Finance said in February.
Kenya will agree a $600 million loan from China to help fund a budget deficit in the fiscal year starting last July, a senior Treasury official said on Friday. Kamau Thugge, the principal secretary at the Finance ministry, told Reuters that the Ministry is in the final stages of the financing agreement with expectations of the money coming soon.
Kenya’s government had factored in external funding when it presented its budget to parliament in June last year. It borrowed $750 million through a syndicated loan in October. The option of foreign borrowing is opted so as not to crowd out private firms
“That external financing is also part of us reducing our borrowing in the domestic market. Therefore we expect pressures on domestic interest rates to also come down once we get that money,” Kamau Thugee had to say.
Patrick Njoroge, the governor of the Central Bank, said on Wednesday that commercial lending rates were too high and needed to come down.