AUSTERITY MEASURES

Yatani promises tough measures in 2020-21 budget

Government to cut its cloth according to its size

In Summary

•Treasury CS Ukur Yatani says the country has to live within its means, indicating his ministry is putting in place measures to cut wastage and tame public funds spending.

•To help reduce spending by ministries, departments and agencies, current austerity measures will be rolled-over to 2020-21 financial year.

Treasury Cabinet Secretary Ukur Yatani when he appeared before Senate Finance Committee on 26/11/2019 over pending bills/ Ezakiel Aminga
Treasury Cabinet Secretary Ukur Yatani when he appeared before Senate Finance Committee on 26/11/2019 over pending bills/ Ezakiel Aminga

Expect reduced spending in mega projects, recurrent expenditure and a revision of tax exemptions, the National Treasury hinted on Wednesday as it kicked off  the 2020-21 budget preparations.

Treasury Cabinet Secretary Ukur Yatani said the country has to live within its means, indicating his ministry is putting in place measures to cut wastage and tame government spending.

This comes even as the next financial year's budget remains focused on the Big Four Agenda.

 

The government has projected expenditure will go down to Sh2.79 trillion from the current financial year's Sh 2.84 trillion, which was later pushed up to Sh3. 02 trillion in the final budget statement.

 Treasury plans to reduce budget deficit to about 3.5 per cent of the Gross Domestic Product from the current target of of 6.2 per cent, amid continued revenue shortage as the Kenya Revenue Authority continue to miss its targets.

“The days of spending what is outside the budget are long gone. We have to live within our means. We need to prepare for that,” Yatani said at the opening of a three-day public hearing on the Sector Budget Proposals for 2020-21.

The government is also keen to shift its focus from external borrowing to the domestic market as it moves to ditch expensive commercial loans in favour of concessional loans.

The public debt, which currently stands at Sh5.97 trillion, has been on the rise mainly to funding of critical development expenditure and bridging the budget deficit.

Both IMF and the World Bank have raised concern over the country's rising debt.

We are working on a strategy to retire some of those expensive and unfriendly commercial loans and substitute with concessional loans,” Yatani said.

 

To help reduce spending by ministries, departments and agencies, Yatani said current austerity measures will be rolled-over to the 2020-21 financial year.

They include cuts on foreign travel and office operations, advertising budgets and a freeze on bench-marking tours.

All trainings, except for highly specialised courses, will also continue to be conducted within the country and in particular the Kenya School of Government and other government facilities.

“We might not have too much luxury,” the CS said, “The austerity measures that we put in place in the current financial year, we are going to sustain them in the next financial year.”

Sectors with multiplier effect will be prioritised, according to the ministry, with those giving low returns likely to have their budgets cut.

Among expected winners in the next financial year are agriculture, manufacturing and tourism, key enablers in the achievement of the Big Four Agenda of increasing manufacturing's share of GDP to 15 per cent and enhancing Universal Health Coverage..

The government is also pushing for food security and enhancing living conditions through affordable housing.

New projects will be scrutinised before being funded, Yatani said, to curb wastage in 'white elephant' projects.

Government will continue to pursue the fiscal consolidation policy, expected to provide and maintain necessary balance between revenues and expenditures so as to ensure the overall fiscal deficit is kept under control and to a bare minimum,” he said.

A number of tax exemptions could equally be scrapped , which according to the ministry, have limited KRA revenue collections, which has pushed the government into debt to meet budget deficits.