Kenya is actively seeking strategies to realign its budget deficit for the current financial year with its original target, following a setback caused by a depreciation in its currency, as per a statement from a finance ministry representative on Wednesday.

In late October, the government of the East African nation adjusted its expenditure plans for the fiscal year 2023/24, extending to June 2024, due to the weakening currency, which escalated foreign debt repayments by 1% of the gross domestic product (GDP).

The revised budget saw an increase in the fiscal deficit from the initial 4.4% to 5.5% of GDP, prompting concerns about the government’s ability to manage public debt.

Musa Kathanje, the director of macro and fiscal affairs at the ministry, shared during a budget preparation event for the 2024/25 financial year that efforts are underway to bring the deficit down to at least 4.7%.

In response to the currency challenges, Kenya’s central bank raised its benchmark lending rate by 200 basis points, the highest in over a decade, aiming to stabilize the exchange rate. Finance Minister Njuguna Ndung’u expressed optimism at the budget preparation forum that this tighter monetary stance would contribute to stabilizing the macroeconomic fundamentals.

Additionally, officials are keen on reducing the inflation rate, which has lingered near 7% for the past three months, aiming for a target of around 5%.

Despite these challenges, the government remains optimistic about economic growth, projecting a 5.5% expansion for the current year and a similar rate for the following year. In 2022, the Kenyan economy recorded a growth of 4.8%.

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