NAIROBI, Jan 19 (Reuters) – Kenya will set a net external financing target of 198.6 billion shillings ($1.60 billion), or 1.2% of its gross domestic product, for its 2023/24 financial year ending in June, the ministry of finance said in a draft budget policy statement.

The government will aim for a net domestic borrowing target of 496.6 billion shillings, or 3% of GDP, for the same period, it said in the policy statement.

The new targets are lower than those set for the current financial year, which stood at 280 billion shillings from external sources and 581 billion shillings locally.

President William Ruto’s administration, which came into office last September, plans to slash the budget deficit to 4.3% of GDP in the 2023/24 financial year, from an estimated 5.8% in the current period, before cutting it further to 3.6% in the 2026/27 period.

($1 = 123.9500 Kenyan shillings)

(Reporting by Duncan Miriri; Editing by Jacqueline Wong and Christian Schmollinger)