June 12, 2014 / 4:30 PM / 4 years ago

Kenya sees fiscal deficit dipping in 2014/15, plans infrastructure boost

* Budget figures suggest 7.4 pct/GDP deficit in 2014/15

* Kenya aims to raise $1.5-2.0 billion in Eurobond

* Economic growth seen at 5.8 percent in 2014

By Duncan Miriri

NAIROBI, June 12 (Reuters) - Kenya expects its fiscal deficit to fall slightly to about 7.4 percent of gross domestic product for the 2014/15 financial year, figures from the finance minister’s budget speech showed on Thursday.

The government has previously forecast a deficit for 2013/14 of 7.9 percent for the east African nation, which aims to raise between $1.5 billion and $2 billion with a debut Eurobond it is now marketing.

Finance Minister Henry Rotich maintained the government’s 2014 economic growth forecast of 5.8 percent and said it would rise to 6.4 percent next year, in a speech that outlined plans to improve security after 12 months that have seen a number of attacks linked to Islamist militants.

“Without security the economy will not grow,” he said, noting that the valuable tourism industry had been hit hard.

Rotich promised new railways, roads and airports in a budget that forecast spending for the financial year starting on July 1 of 1.581 trillion shillings ($18.03 billion).

He put the overall deficit at 342.4 billion shillings, of which he said net external financing amounted to 149.2 billion shillings, or 3.2 percent of GDP, while domestic borrowing would cover 190.8 billion shillings, or 4.1 percent of GDP.

The remaining 2 billion shillings would be covered by loan repayment receipts, he said.

Those figures would indicate a total budget deficit of around 7.36 percent of GDP, based on a Reuters calculation.

On infrastructure, he said the government would finalise financing in the new financial year for a second stage of a new standard gauge railway between Nairobi and the Ugandan border. Building the first stage from the coast to Nairobi has begun.

The new line will replace a slower, narrow gauge line built in the 19th century.

Rotich said the government would build three new airports: at Malindi on the coast, Mandera in the north and Suneka in the western part of the country. The road network would also be expanded.

Other members of the five-member East African Community were also announcing their budgets on Thursday. (Editing by Edmund Blair and Susan Fenton)

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