The 2025 Draft Budget Policy Statement
FY 2025/26 total revenue is projected to increase by 15% to KES 3.5T
👋 Welcome to The Mwango Weekly by Mwango Capital, a newsletter that brings you a summary of key capital markets and business news items from East Africa.This week, we cover the 2025 Draft Budget Policy Statement, KNBS's Q3 2024 report and Limuru Tea’s profit warning.The 2025 Draft Budget Policy Statement
Last week, the government released the draft Budget Policy Statement for 2025. Here are a few key takeaways:
Revenue: In FY 2025/26, total revenue, including A.i.A, is projected to increase by 15% to KES 3.5T, up from the estimated KES 3.06T in the FY 2024/25 Supplementary Budget. Ordinary revenue is forecasted to reach KES 3.01T, compared to KES 2.6T in the FY 2024/25 Supplementary Budget, supported by enhanced domestic revenue mobilization and expenditure rationalization.
As of November 2024, revenue grew by 7.6% to KES 1.08T but fell short of the KES 1.16T target by KES 77.3B. To address this, the government is focusing on expanding the tax base, reducing tax expenditures (currently 2.94% of GDP), improving compliance, leveraging technology, and boosting non-tax revenues from public services.
Expenditure: As per the 2025 BPS, total expenditure is projected to increase by 11.6% to KES 4.3T, up from KES 3.8T in FY 2024/25 as per the Supplementary Budget. Development expenditure is set to grow significantly, rising by 34.2% to KES 804.7B, compared to KES 599.5B in FY 2024/25. In contrast, recurrent expenditure is expected to grow by 8.9% to KES 3.07T, up from KES 2.8T in the same period.
To manage expenditure growth, the government has outlined several efficiency measures, including the implementation of the Treasury Single Account, adoption of accrual accounting, and a zero-based budgeting approach among other reforms.
Public Debt: The projected fiscal deficit for FY 2025/26 is KES 759.4B (3.9% of GDP), down from KES 768.6B (4.3% of GDP) in FY 2024/25. It will be financed by KES 213.7B (1.1% of GDP) in external financing and KES 545.8B (2.8% of GDP) in domestic financing.
Economic Expansion: Economic growth is projected to expand by 4.6% in 2024 and 5.3% in 2025, driven by a strong services sector, manufacturing recovery, high agricultural productivity, and improved exports.
Pending Bills: As of June 30, 2024, counties reported accumulated pending bills of KES 181.98B, an increase of KES 17.22B from KES 164.76B in the previous period, as reported to the Office of the Controller of Budget.
Find the Draft 2025 Budget Policy Statement here.
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Q3 2024 GDP
The Kenya National Bureau of Statistics released its report for economic activities for Q3 2024. Below are key highlights from the report:
GDP Growth: Kenya's economy grew by 4.0% in the third quarter of 2024 compared to 6.0% growth in Q3 2023 [Q3 2022: 4.7%]. This is the slowest growth in the third quarter since 2020.
Sectoral Growth: Economic activity declined in the quarter, primarily due to contractions in Construction at 2.0% and Mining and Quarrying at 11.1%. However, the downturn was partly offset by growth in the Accommodation and Food Services sector, which grew the most at 13.7%, followed by Real Estate at 5.5% and Transportation and Storage at 5.2%.
Balance of Trade: Imports in Q3 2024 stood at KES 625.3B, an increase of 5%. Total exports rose 5.5% to reach KES 227.8B; bringing the trade account deficit to of KES 393.4B from a deficit of KES 380.0B in the corresponding quarter of 2023.
Current Account Deficit: The current account balance narrowed from a deficit of KES 139.8B in the third quarter of 2023 to a deficit of KES 139.2B in the third quarter of 2024 [ Q3 2022: KES 193.4B].
Remittances: Diaspora remittances totalled KES 164.9B in the quarter an increase of 5.8% [Q3 2023: KES 155.8B].
You can access the Quarterly Gross Domestic Product Third Quarter 2024 report here and the Quarterly Balance of Payment and International Trade Report Third Quarter 2024 here.
Markets Wrap
NSE This Week: In Week 3 of 2025, HF Group emerged as the top gainer, rising 54.8% to KES 8.98, while Stanbic Holdings was the worst performer, dropping 10.7% to KES 140.25. The NSE 20 and NASI indices rose by 0.1% and 0.9%, closing at 2,146.9 and 130.8 points, respectively. However, the NSE 10 and NSE 25 indices fell by 0.5% and 1.2%, closing at 1,330.9 and 3,470.6 points. Equity turnover dropped by 32.1%, totaling KES 1.8B, while bond turnover increased to KES 47B, up from KES 30B the previous week.
Treasury Bills: Treasury bills were undersubscribed this week with a subscription rate of 78.59%, down from 138.10% the previous week. Investors placed bids totaling KES 18.8B, with KES 18.1B accepted, resulting in a 96% acceptance rate. Yields on the 91-day and 364-day bills declined by 2.9 and 3 basis points to 9.5647% and 11.3044%, respectively, while the 182-day yield increased slightly by 0.5 basis points to 10.0299%.
Treasury Bonds: The reopened 15 and 25-year Treasury Bonds attracted significant interest. The government offered KES 30B and received total bids worth KES 58.99B, of which KES 48.48B were accepted. The weighted average rate of accepted bids stood at 14.21% for the 15-year bond and 15.68% for the 25-year bond.
Market Gleanings
⛽️| Jan/Feb Pump Prices | The Energy and Petroleum Regulatory Authority (EPRA) increased pump prices for the January/February cycle. Super Petrol rose by KES 0.29 to KES 176.58, Diesel by KES 2.00 to KES 167.06, and Kerosene by KES 3.00 to KES 151.39.
☕️| Limuru Tea Issues Profit Warning | Limuru Tea Plc has announced a profit warning, projecting a decline of over 25% in profit after tax for the financial year ending 31st December 2024. The company attributes this to increased operational costs driven by higher industry wage rates and elevated fertiliser importation costs due to the depreciation of the Kenya shilling against .the US dollar for the year 2023. Additionally, the company anticipates a loss in biological asset valuation for the year.
🚘| CMC Motors Exits East Africa | CMC Motors Group has announced the closure of its operations in Kenya, Tanzania, and Uganda after over 40 years in the region. The company, owned by Al-Futtaim Group since 2014, cited persistent market challenges, including economic pressures, currency depreciation, and rising operational costs, as key factors behind the decision. Despite restructuring efforts and a 2023 transformation program, the business found no viable growth path.
🤝| Kenya-UAE Trade Deal | Kenya and the UAE have signed a Comprehensive Economic Partnership Agreement (EPA) to boost trade, investment, and economic cooperation between the two nations. The deal, presided over by President William Ruto and His Highness Sheikh Mohamed bin Zayed Al Nahyan, focuses on increasing Kenyan exports such as meat, fruits, vegetables, and flowers to the UAE while fostering investment in key sectors like energy, agriculture, and ICT. The agreement, the UAE’s first of its kind in mainland Africa, also seeks to enhance access to Middle Eastern and Asian markets and promote technological innovation, and digital trade.
💸| Cash in Circulation Rises to KES 333.8B | Cash in circulation rose by KES 17.8B to KES 333.8B in the year to June 2024, according to the Central Bank of Kenya. The 5.64% increase reflects higher withdrawals as Kenyans turned to cash amidst economic uncertainty, high interest rates, and inflation. Banknotes grew by 5.7% to KES 322.77B, while coins increased by 4.5% to KES 11.03B. The rise occurred alongside a sharp decline in private sector credit growth, dropping to 4% from 12.2%, with CBK citing exchange rate effects on foreign currency loans as a contributing factor.
📞| Safaricom PLC Board Changes | Safaricom has appointed Edward Okaro as an independent non-executive director, following the resignation of Rose Ogega on November 29, 2024. He has worked with Ernst & Young for 26 years, rising to Director and subsequently Partner in Ernst & Young Africa Risk Services.
🇧🇯| Benin Launches USD 500M Bond | Benin has successfully issued a USD 500M dollar bond, marking Africa’s first sovereign debt sale of the year. Priced at a yield of 8.625%, below the initial target of 9.25%-9.375%, the bond attracted USD 3.5B in orders—seven times the amount sought. Set to mature in January 2041, the bond outperformed in Bloomberg’s index for emerging and frontier market hard-currency debt, with prices surging the most since its February 2023 debut.
Chart of the Week
Amazing. Never stop posting 💯💯