NAIROBI (AFP) -- Kenya raised its annual expenditure to nearly 30 percent of its Gross Domestic Product in budget proposals designed to spur development in the east African nation.

Expenditure increased to 580.4 billion shillings (8.7 billion dollars) from 427.6 billion shillings (6.4 billion dollars) in the previous year, which represented 28.2 percent of GDP, said Finance Minister Amos Kimunya.

"Expenditures are therefore forecast to be more development oriented, and with a special focus on improving infrastructure," Kimunya told parliament.

However, Kimunya said the new fiscal year will experience a budget deficit of 109.8 billion shillings (1.6 billion dollars), equivalent to 5.3 percent of the budget, of which 39.8 billion shillings will covered by donors and 70 billion shillings in domestic borrowing.

The revenue was estimated to be 428.8 billion shillings, an increase of 14 percent on last year.

Kimunya said the revenue would be collected from on-going tax reforms and the streamlining of exemption regimes under the East Africa Community trade agreement would protect the country's revenue base.

Analysts have said the 2006/7 budget would be tailored to please voters ahead of the December general elections when President Mwai Kibaki would seek re-election.

The government allocated money for a raft of sectors, notably the free secondary school education set to start in January, hiring of teachers, construction of roads, resettlement of squatters and writing off bad debts owed by coffee farmers.

"To make our medicare care affordable and accessible to Kenyans, import duty on medical equipment imported from licensed hospital will be exempted from duty," he told the national assembly.