Taxpayers are in for a major raid by the government as it plans to raise more money to fund the Sh3.6 trillion budget for the next financial year starting July 1.
This comes amid a higher spending plan by the Kenya Kwanza administration, which has increased recurrent expenditure, while cutting its development budget for the 2023-24 financial year.
According to a communiqué by State House spokesperson Hussein Mohammed, dubbed ‘Bottom-Up Economic Transformation Budget Financial Year 2023/24’, the next financial year’s planned spending is an increase from Sh3.3 trillion in the current fiscal year ending June 30.
Recurrent expenditure, which include wages and salaries, will take the lion share of President William Ruto’s first budget, where the government has projected a spending of Sh2.5 trillion, up from Sh2.2 trillion this year, amid an expanded public service.
Development expenditure has been set at Sh689.1 billion (4.2 per cent of GDP), which is a reduction from Sh715.5 billion.
The higher spending plan comes with an increased target for Kenya Revenue Authority (KRA), which will have to go after the few taxpayers, in an economy that is yet to maximise on the potential of the informal sector in widening the tax bracket.
Treasury has projected revenue collection at Sh2.9 trillion in the financial year 2023-24, an increase from the 2022-23 target of Sh2.5trillion that KRA.
This is expected to further go up to Sh4.1 trillion (18.3 per cent of GDP) by the financial year 2026-27, as Treasury predicts an upward improvement in the fiscal outturn.
Fiscal deficit is projected at Sh663.5 billion (4.1 per cent of GDP), a reduction of more than Sh450 billion from the current year’s Sh1.12 trillion.
This comes as the government mulls over a reduction in borrowing, a move that will add pressure on KRA to collect more revenues to fund the country’s budget.
The government is however confidence of a strong growth this year, projecting an economic growth of 6.1 per cent this year.
According to Treasury, leading indicators show a strong performance of the Kenyan economy in the first quarter of 2023, reflecting robust activity in the service sector and also in the wholesale and retail trade, accommodation and food services, education and information, and communication.
“The growth outlook will be supported by a broad-based sector growth, including continued strong performance of the service sector and recoveries in agriculture, while the public sector consolidates,” State House said the statement yesterday.
From the expenditure perspectives, private consumption is expected to support aggregate demand, supported by the ongoing labor market recovery, improved consumer confidence and resilient remittances.
Meanwhile, the government under the Finance Bill is keen to reduce the costs of cooking gas , boost tea sector, fish industry, manufacturing, investments among other, with proposed VAT and other levies exemptions.
