In a bid to steady the economy which is expected to grow 6.1 percent in 2016, Kenya’s Finance Minister has recently announced that the government wants to trim ballooning budget and current account deficits.
Finance Minister Henry Rotich said the global slump in the price of crude oil had helped the country’s current account deficit to improve due to a lower import bill.
“With the measures we are taking to cut the fiscal deficit, the twin deficits will obviously go down. We are aiming at around 6.5 percent current account deficit and also getting our fiscal deficit, including grants, coming down to about 4.5 percent.”
Rotich added that the treasury wants to start attaining those targets from the next fiscal year and into the medium-term.
Kenya, East Africa’s biggest economy, set a budget deficit target of 8.7 percent for the 2015/2016 fiscal year starting July, unnerving some investors who were also uneasy about Kenya’s current account deficit, which stood at above 8 percent.
The current account deficit was fuelled by a growth of imports like oil and consumer goods which was not matched by growth in exports. The budget deficit swelled due to increased spending on infrastructure projects and local government units created in 2013.
Officials and investors say the government has to deal with the deficits to boost investor confidence and stave off instability in the currency and borrowing rates.
