Domestic Borrowing to be cut by 47%

Kenya plans to cut its domestic borrowing by about 47% this financial year to stimulate economic growth, the presidency said in a statement on Monday. The World Bank trimmed the 2014 economic growth forecast by 50 basis points to 4.7% in June, citing poor rains and growing insecurity in Kenya, east Africa’s biggest economy. A series of bombings and gun attacks by Somali al Shabaab militants has damaged Kenya’s tourism sector. The Islamist group wants Kenya to withdraw its troops from Somalia where they are fighting as part of an African Union peacekeeping force.

The presidency said the Treasury plans to borrow 100bn Kenyan shillings in the 2014/2015 financial year, down from about 190bn shillings it borrowed last year. Kenya’s debut $2bn Eurobond issued in June drew bids of $8.8bn. President Uhuru Kenyatta has in the past said he hopes the bond would cut the government’s local borrowing requirement, which would in turn help reduce interest rates. The presidency said Kenyatta was confident the Eurobond has “created room for banks to lend to the private sector”.

The budget for 2014/15 announced in June anticipated a budget deficit of about 7.4% of gross domestic product and local borrowing of 190.8bn shillings (US$ 2.18bn), or 4.1% of GDP.

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