Country Report Kenya February 2011

Outlook for 2011-15: Fiscal policy

The government will maintain an expansionary fiscal policy in 2010-12, to boost economic growth, but will embrace gradual consolidation in 2013-15 to help to keep debts in check. Kenya's budget for fiscal year 2010/11 (July-June) proposes another large deficit-equivalent to 6.8% of GDP-as the government persists with fiscal stimulus, geared mainly towards capital spending, to encourage growth. Domestic borrowing will remain the main source of financing in 2010/11 (and throughout the forecast period), and the government will seek additional concessional lending from donors. The award in January 2011 of a new IMF credit package will help to contain budget pressures in the second half of the fiscal year. The Economist Intelligence Unit expects the government to retain a fairly loose stance in 2011/12, to support growth, but to start to curtail the stimulus, trimming the budget deficit to 6.5% of GDP. Consolidation will be swifter thereafter, helped by stronger revenue growth, which will reduce the budget deficit to less than 5% of GDP by the end of the forecast period. The public debt burden will rise higher in 2011-12 before gradually declining.

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
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