Kenya has slashed the 2024-25 budget starting July 1 to Sh3.7 trillion from the initial Sh4.2 trillion.
Addressing the Kenyan diaspora in Accra, Ghana, Ruto who is on a three-day state visit said it is time the country lived within its means.
"I had a meeting with parastatals and ministries, and we agreed that we are reducing our budget from Sh4.2 trillion to Sh3.7 trillion. We need to live within our means... you cannot spend what you do not have. Cut the clothes to the right size," Ruto said.
Although he did not go into the details on how the government intends to implement budget cuts, the president said that beyond the rationalisation for parastatals recurrent spending there will be changes in some other some other line items.
His remarks come less than two months after the National Treasury issued a Budget Policy Statement (BPS) indicating that the country will be spending Sh4.23 trillion against a total revenue of Sh3.39 trillion.
According to the Treasury, the country Kenya is expecting to close the financial year ending June 2024 with a deficit of Sh832.3 billion or 5.2 percent of GDP.
It had initially targeted to lower this to Sh800 billion or 4.4 percent of GDP in the 2024/25 financial year and reduce it further to Sh719.9 billion or 3.6 percent of GDP in the following year.
Even so, some economic experts are pessimistic, saying that it has become a norm for the country to set up unrealistic budget deficits, only to breach them through supplementary budgets.
Dave Agoi wants the Kenya Kwanza administration to be more logical in the budget-making process to avoid pilling pressure on Kenyans as the tax collection agency struggles to meet targets.
"This is my 12th year tracking Kenya's budget deficit targets. Although a slight reduction has been noted over the years, none has ever been achieved,'' Agoi said.
A senior official at the Institute of Certified Public Accountants of Kenya (ICPAK) who sought to remain anonymous due to the nature of his position termed Ruto's sentiment as 'hot air'.
"We are now used to this song. Why cut a whole Sh500 billion just two months after releasing BPS? What prevents the government from coming up with supplementary budgets within the financial year?".
In 2019, the International Monetary Fund (IMF) termed Kenya's budget deficit plans as ''just good on paper''.
Although the country set total expenditure for the current financial year at Sh3.7 trillion in June last year, the first supplementary budget pushed it to Sh3.98 trillion before the National Treasury proposed a Sh78.6 billion cut in February.
The Okoa Uchumi movement made up of a dozen civil rights groups wants President William Ruto to keep his word on budget cuts given low revenue collection.
"It is true that Kenya must live within its means. We can't collect less and spend extraordinarily high. The debt burden is already too high to bear,'' Okoa Ucumi said in a media response.
In the current fiscal year ending June this year, the Kenya Revenue Authority (KRA) has been tasked with collecting Sh2.62 trillion from both direct and indirect taxes.
These collections rely heavily on the revenue-raising measures contained in the Finance Act 2023, including the doubling of the value-added tax (VAT) on fuel.
According to the National Treasury data, it has missed its target for the first six months by Sh186.2 billion, with income taxes paid by corporations and employees contributing the most to this shortfall.
