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• Inside Kenya’s Supplementary Budget

• Kenya Shilling, Stock Market, Outperformed Global …

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Inside Kenya’s Supplementary Budget

This week, Parliamentary committees will begin considering the supplementary budget for the next fiscal year, amidst legal questions of the Finance Bill 2024, a dissolved cabinet, and ongoing protests.

• The first budget, submitted last month and signed into law as the Appropriations Act 2024 will now be reduced by KShs. 156bn as the government seeks to reduce its spending.

• Since the funding element was sent back to Parliament, there’s now a KSh. 344.3bn hole in Kenya’s planned finances for the next year, which means the country will still have to go to debt markets to cover the difference.

• The new estimates reduce cabinet’s budget by 6.6 per cent, recurrent expenditure by 2.1 percent, and the entire budget by an overall of 3.3 percent from KSh. 3.981 trillion to 3.848trillion. 

“The Departmental Committees are expected to engage with Ministries, State Departments and Agencies to review the Supplementary Estimates No.1,” Parliament said in a statement, “The Budget and Appropriations Committee is also required to guide the process, seek public views and report to the House on or before Wednesday, July 24, 2024.

Why it Matters

The budget making process for FY 24/25 has been the most publicly intensive process in recent times, starting with its lowering to under KSh 4 trillion in April to the subsequent rejection of the Finance Bill, which sort to raise tax revenues through a raft of measures that are now on hold.

President Ruto’s refusal to sign the Bill into law in late June raised some legal questions, which will be among the first things the National Assembly considers when it reconvenes next week. But more than that, it raised technical questions, since government expenditures and collections happen every day.

Expenditure is now limited until Parliament reconvenes, considers the President’s recommendation to delete the Finance Bill, and discusses the Supplementary Budget which includes a raft of expenditure cuts. It also includes some hikes, such as the allocation to county governments, which will receive KShs. 14bn more. Among the biggest cuts are Energy (KShs. 18bn), Basic Education (KShs. 14.9bn), and Roads (KShs. 14.1bn).

Kenya Shilling, Stock Market, Outperformed Global Peers in H1

In the first half of 2024, Kenya’s financial markets saw a significant surge with the shilling and Nairobi Securities Exchange (NSE), outpacing global peers.

Data compiled by The Kenyan Wall Street shows that the shilling surged 17.2%, becoming the best-performing currency worldwide, while bond market turnover doubled to KSh 781.8 billion. The NSE posted an impressive 50.4% growth in dollar returns, buoyed by a robust stock market rally and a significant increase in foreign investor participation, which rose to 65.6%. 

At the dawn of 2024, the highly volatile shilling fell further, touching all time lows of above 160 against the greenback on the fear of looming defaults. The government made a move in early February to buy back 72.3% of  the June Eurobond maturity with the balance cleared on 21st June, just days before the maturity date. 

Generally, the strong performance was buoyed by the long term transitory effects of the tightened monetary policy in the hindquarter of 2023, the Eurobond buyback in February and the  IFB1/2024/8.5 bond issued in February 2024 which attracted dollar denominated inflows with a whooping 412.4% subscription rate.

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