Treasury keen on spending cuts and higher revenues in 2023/24 budget

This comes as the exchequer announced that it will reduce non-core expenditure from its budget

In Summary
  • According to the treasury, the state is on a fiscal consolidation path to ensure the country preserves its debt sustainability.
  • This as it races to gradually reduce expenditures to about 22.7% of GDP over the medium-term.
National Treasury and Planning CS Njuguna Ndung'u
FIXING ECONOMY: National Treasury and Planning CS Njuguna Ndung'u

Kenya is determined at reducing the national budget deficit, cutting on debt and increasing revenue collection in the 2023-2024 budget.

According to the National Treasury, the state is on a fiscal consolidation path to ensure the country preserves its debt sustainability as it races to gradually reduce expenditures to about 22.7 per cent of GDP over the medium-term.

This comes as the exchequer announced that it will cut non-core expenditure as the new administration embarks on restructuring that seeks to tame arbitrary spending by state entities.

Speaking at the launch of the budget preparation process for the 2023/2024 financial year, the director of macro and fiscal affairs at the National Treasury Musa Kathanje said the projections show that the deficit will drop to 5.8 per cent this year.

This is a big improvement from what is currently in the printed estimates of 6.2 per cent. We will be looking to reduce the fiscal deficit to decline further to 4.3 per cent of GDP and then maintain a level towards 3 per cent over the medium term,” Kathanje said.

Already the Treasury has directed ministries, departments and agencies to scale down their budgets in line with budget cuts recently announced.

The exchequer pointed out that the government will strengthen institutions that will set outright targets and goals of the legal framework.

It also notes that the government will appropriate incentives that will support the fight against corruption to eliminate pilferage of public resources.

In this regard, the principles of efficiency, effectiveness and economy of public spending will be strictly enforced by ensuring that low-priority expenditures give way to high-priority service-delivery programmes.

The Treasury Cabinet Secretary Njuguna Ndung’u, added that the fiscal consolidation process is guided by the budget calendar which stipulates timelines for several key activities to be undertaken, to finalise the budget and submit it for approval by April 30 of each financial year.

As we prepare for the financial year 2023/24 and the medium term budget, our focus will be on aggressive revenue mobilisation so as to bring on board additional revenues,” the CS noted.

He added that the government intends to contain growth in non-priority expenditures so as to reduce the fiscal deficit that will support reduction in the growth of public debt to ensure sustainability.

In this regard, the sector working groups will be required to carefully scrutinise all proposed programmes for Ministries, Departments and Agencies (MDAs).

This is to ensure that they are not only directed towards improving productivity but are also aligned to the achievement of the objectives.

In recent days the government through the Kenya Revenue Authority, has ramped up tax collection drive in an effort to tame external borrowing to meet budget shortfalls.

Government MDAs have been on a spending spree further compounding pressure on the treasury to meet the increasing spending.

According to data from the National Treasury, spending across the 2022/23 financial year has been estimated at Sh3.358 trillion against revenues projected at Sh2.462 trillion.

This leaves behind a financing hole estimated at Sh862.9 billion.

Of the Sh3.4 trillion budget this financial year, Sh2.271 trillion is estimated to be recurrent expenditure which includes spending by ministries.

The fiscal performance in the FY 2021/22 was satisfactory, largely attributed to improved operating business environment following the recovery of the economy from the adverse impact of Covid-19 pandemic," Ndungu said.

"Revenue performance recorded a growth of 22 per cent compared to a marginal growth of 0.3 per cent in FY 2020/21."

Through the initiatives, the government seeks to improve revenue collection to over 18.0 per cent of the GDP over the medium-term.

Treasury figures show that during the last financial year, the growth in revenue collection was recorded in all broad tax categories.

However, the good performance was overshadowed by the effects of the Russia-Ukraine conflict which has put pressure on the prices of energy, food, and other commodities.

This pushed inflation to a high of 9.6 per cent by end of October 2022.

This coupled with the unfavourable conditions in the sovereign bond market that resulted in below target performance in foreign financed resources.

Shortfalls in the domestic market also affected expenditure performance during the period.

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