Kenya awaits loans worth Ksh.264 billion this month

Kenya is expected to receive a record Ksh.264.1 billion in external loan support this month, as the 2020/2021 financial year closes out on June 30.

The external inflows include Ksh.44 billion from the International Monetary Fund (IMF) representing a second tranche disbursement from the Ksh.255 billion program announced in February.

Additionally, Kenya is set to receive Ksh.82.5 billion from the World Bank Development Policy Operations (DPO), Ksh.13.8 billion from the African Development Bank (AfDB) and Ksh.123.8 billion from a fourth Eurobond issue.

According to analysts at Genghis Capital, the disbursement of the loan facilities in their entirety will result in out sized revenue flows to the National Treasury which is further expected to funnel in significant tax collections in the period.

Despite the expected positive flows, the analysts caution the budget absorption rate has remained lethargic pointing to the ineffectiveness of astronomical spending plans by the government.

“At a fundamental level, the question that keeps popping in our heads is how fast the out sized flows will be deployed,” they said.

The absorption of funds remained low in 10 months of the current financial year.

Net disbursements for recurrent and development for instance represented a performance rate of 76.2 per cent and 64.3 per cent respectively while disbursements to Counties at Ksh.239.8 billion represented 62.5 per cent of the overall fiscal year’s target.

“As the leopard doesn’t change his spots, we are less convinced that the out sized flows will make up for the lost ground of budgetary execution. This goes counter to the ambitious budget spending targets that have played out in each fiscal year. We know that everyone needs a dose of motivation once in a while, but to literally apply, ‘Aim above the mark, to hit the mark’, in matters fiscal is a tad reckless. Plus it erodes the credibility of budget implementation,” added the analysts.

“We thus opine that even as the FY 21/22 budget is firmed up, recent budget out-turns support the case for a pivot away from a KES 3.6Tn budget and to a more realistic lower level.”

In the new financial year commencing on July 1, the government preempts its spending at Ksh.3.053 trillion (excluding debt redemption’s).

The fiscal operations are expected to be funded from Ksh.2.039 trillion in projected total revenues and Ksh.953 billion in net financing.

The size of the budget nevertheless tips upwards to Ksh.3.6 trillion after factoring Ksh.608.9 billion in scheduled debt repayments.

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