Kenya - keen to boost economic growth through infrastructure reform - will issue 31.5 billion shillings ($391.8 million) worth of infrastructure bonds in its fiscal year beginning next month, a senior Treasury official said on Thursday. Finance Minister Uhuru Kenyatta increased the deficit as a percentage of GDP to 6.8 percent from 6.6 percent, to fund a range of increased spending in key areas like roads, during his budget speech last week. The Economic Secretary at the finance ministry, Geoffrey Mwau, said the government was cutting back on its local borrowing program. “This (2010/11 budget) is not expansionary in any way. We are getting back to a borrowing level that is affordable. We have already started to put on the brakes. We are now in gear number three going down to two and one,” Mwau told Reuters. The planned 105.2 billion shillings of borrowing for this year is below this year's total borrowing of 126 billion shillings. The government had initially planned to borrow 109 billion shilling for the 2009/10 year but was forced to borrow more by emergencies like drought. In financial year 2009-10 Kenya sought to borrow 33 billion shillings for infactruture projects, but ended up taking an extra 1.8 billion shilling after the bond offerings were over subscribed. Kenya will use concessional loans, from major partners like the World Bank and the African Development Bank, to cover 82 billion of the 188 billion shilling deficit. Treasury bonds and bills will account for 73.7 billion shillings in borrowing. The economy was on track to attain a better-than-the government's own forecast of 4-5 percent growth this year, Mwau said, without indicating the likely outturn for the period. “The price of basic commodities like vegetables is still very affordable, because they are available. Crop production will be high especially for cash crops, energy is also a major factor here,” said Mwau, in reference on ongoing rains. He said Kenya faced risks ranging from the political situation internally to from unforeseen events abroad like the Icelandic volcano ash crisis, which hurt horticulture exports. Crises in the euro zone have also weakened the local currency. “The only thing we are worried about now are unexpected shocks like what happened at Uhuru Park. You don't want things like that to happen because they could scare away tourists and the sector could be affected,” he said.
