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Kenya to cut fiscal deficit by increased domestic revenue collection

NAIROBI,(Xinhua) -- Kenya has announced a drastic cut in the fiscal deficit from 9 percent of the Gross Domestic Product (GDP) to 4 percent by 2019/2020, buoyed by increased domestic revenue collection and the restructuring of the foreign debt.

Treasury Minister Henry Rotich told Parliament on Thursday evening that the government recorded a higher financial shortfall equivalent to 9 percent of the country’s overall economic strength as a result of overspending on a strike by doctors, nurses and teachers, security and challenges of handling drought.

"The result was a higher fiscal deficit of 9 percent of GDP, financed by external debt, fiscal consolidation and increased grants," Rotich said while presenting this year’s budget statement for the 2017/18.

Kenya and other East African countries usually present their annual spending plans on a simultaneous date across the region as part of the ongoing effort to synchronize economic cooperation.

Kenya, which released this year’s fiscal plan, ahead of other East African countries because Parliament needs to be dissolved ahead of this year’s August polls, said improved tax collection effort and minimized leakage of government taxes were part of measures to cut the overall fiscal deficit.

Kenya unveiled its 26 billion U.S. dollar budget on Thursday, saying the new budget for the year, would guarantee funds to the Independent Electoral and Boundaries Commission (IEBC) to conduct the elections in August.

The government also announced allocation of funds to improve public infrastructure, such as 750 million dollars towards the continuation of the Standard Gauge Railway (SGR) project to Naivasha, 100 km outside Nairobi, to enhance transport within the country.

Rotich said measures under implementation this year would enable the government to achieve rapid economic growth, cut the fiscal deficit and bolster the tax administration system through technology.

The new measures announced by the government follow the recent launch on a trial basis of the mobile-phone enabled government bond purchase programme.

Rotich also introduced a 50 percent tax on the gambling industry.

Rotich introduced new tax measures in the 2016 Finance Act that set betting taxes on gaming revenues at 7.5 percent, lottery tax on turnover at 5 percent and gaming tax at 12 percent.

"The betting and gaming have become widespread in our society in an environment that is inadequately regulated.

"Its expansion is beginning to have negative social effects in particular on the young and vulnerable members of our society," Rotich said.

"I, therefore, propose to raise taxes for betting, lottery, gaming and competition from the current rates of 7.5 percent, 5 percent, 12 percent and 15 percent, respectively to a uniform tax rate of 50 percent for all categories," Rotich said in his budget speech.


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