While it would be overly dramatic to describe the state of Kenya’s finances as being in the red zone it is safe to say that there are some slight causes for concern. These causes for concern mainly relate to the growing levels of debt and the deficit. As things stand the total debt is currently around 50 % of GDP while the past budget deficits have hovered between 5.5% – 6.8 % of GDP.
A budget deficit is not inherently devastating, seeing as governments are not in the business of profit making. In fact, it would be reckless for a government to sit on a huge surplus while that country faces welfare, recurrent and development expenditure needs. However, large deficits year after year translate into troublesome/unacceptable government debt, which is more often than not paid for by future generations by way of taxes. This is the case in Kenya, where over the last few years, government spending has consistently exceeded government revenues. And based on the recently released estimates from the Treasury, showing planned spending of KShs. 1.2 trillion, all indications are that government spending is on a one way path upwards. This, coupled with the government reducing tax on various fuel products and cereals, all have the effect of further widening the deficit, accumulating the debt and further burdening future generations.