The Cabinet has approved a Supplementary Budget aimed at cutting government spending by Sh300 billion shillings as a measure of containing the fiscal deficit.
The Kenya Kwanza governing council says the proposed fiscal consolidation will be key to rationalising national debt currently at Sh8.7 trillion as the country approaches the Sh10 trillion borrowing cap set by Parliament last June.
The budget cut plan seeks to reduce the need to borrow Sh862.5 billion to plug the hole in the Sh3.3 trillion budget for the 2022/23 financial year.
"The 2023 budget anchors the economic recovery agenda of the government through a growth-friendly fiscal consolidation designed to slow down annual growth in public debt,'' a statement from the cabinet reads in part.
Travel, entertainment, training and publicity budgets will be the first targets of the Sh300 billion budget cuts even as the cabinet directs the National Treasury to work with other ministries to reduce the nearly Sh1.18 trillion recurrent budget for this fiscal year ending June 2023 by at least one quarter.
“The government should never borrow to finance recurrent expenditure. It is not right, it is not prudent, and it is not sustainable. It is simply wrong,'' Ruto said.
His government is targeting to reverse the current situation and ensure that the government contributes to national savings effort by keeping recurrent expenditure below revenue levels.
The country's public debt stock represents 62.3 percent of gross domestic product (GDP) with the domestic stock standing at Sh4.38 trillion as external debt amounted to Sh4.35 trillion as of end of November last year.
Former President Uhuru Kenyatta’s Jubilee administration heavily relied on loans to fund capital-intensive projects consequently ballooning the public debt from a Sh1.89 trillion stock inherited from the late President Mwai Kibaki to the Sh8.7 trillion at the time Kenyatta left office.
This means the regime borrowed a cumulative average of Sh6.7 trillion during its nearly 10-year tenure.
Top economists have welcomed the cabinet approval, with Mohamed Wehliye commending Kenya Kwanza's government for the bold step.
"At current projection, the risk is we see a bigger drop from the planned debt insurance unlikely foreign currency markets will open for Kenya before the Fed starts cutting interest rates starting Q4,'' Wehliye twitted.
His counterpart James Milimu says the country can do so well if it lives within its budget.
"The problem is that the government has been living beyond its means. Rationalisation is key as most resources are misused,''Milimu told the Star on phone.
At the same time, the cabinet also considered the 2023 Budget Policy Statement as well as the Medium Term Debt Management Strategy.
Kenya is proposing to spend a total of Sh3.641 trillion to run President William Ruto administration’s 2023/24 Budget as the government stares at a tough balancing act between debt servicing and supporting economic recovery.
While the proposal is about Sh300 billion less than the current Budget, the amount is an increase from the Sh3.39 trillion Budget that the Jubilee administration had projected for the 2023/24 financial year.
From the spending plan, which will be tabled in Parliament in June, Sh2.433 trillion will go to recurrent expenditure, while Sh796.4 billion will be spent on development programmes.
