Belt-tightening times as Ruto enacts Sh273bn budget cut

Next year's budget reduced from Sh4.2 trillion to Sh3.9 trillion in stringent rationalisation plan

In Summary

• Ministries, Departments and Agencies face tough times.

• Treasury said the cuts were informed by the underperformance of revenues in 2023-24.

Treasury CS Njuguna Ndungu shows the briefcase containing the 2023-24 Budget proposals ahead of presentation before National Assembly on Thursday, June 15, 2023.
Treasury CS Njuguna Ndungu shows the briefcase containing the 2023-24 Budget proposals ahead of presentation before National Assembly on Thursday, June 15, 2023.

President William Ruto has made good his threat to slash ministries budget by hundreds of billions in the coming financial year, in an intended move to align expenditures with available resources.

Estimates tabled in Parliament by the National Treasury, show the Kenya Kwanza government has slashed the budget, for the financial year starting July 1, by Sh273 billion.

The move would see the projected spending plan for the next financial year go down from the Sh4.18 trillion that MPs approved in the 2024 Budget Policy Statement, to Sh3.91 trillion.

Treasury said the cuts were informed by the underperformance of revenues in 2023-24.

“Revenues have been below target and previously before the resolution of the Eurobond 2024, domestic liquidity and borrowing was constrained,” the CS Njuguna Ndung’u-led ministry said in a memorandum to Parliament.

Treasury disclosed that by the end of March 2024, total revenue was below target by Sh270 billion-of which ordinary revenue accounted for a shortfall of Sh255 billion.

“To remain on course of the path for fiscal consolidation, there is a need to contain borrowing and rationalise expenditure to sustainable levels,” it advised.

Ministries, Departments and Agencies face tough times in the belt-tightening measures that President Ruto said would be sustained for a while.

The Executive has been allocated Sh2.24 trillion, Sh1.5 trillion being for recurrent expenses and Sh724 billion for development.

About Sh750 billion of next year’s budget would go to interest payments for domestic debt, Sh260 billion for foreign debt interest and Sh203 billion for pensions, salaries and allowances for state officers paid from the Consolidated Fund.

Allocations to Parliament and the Judiciary have been maintained at Sh43.6 billion and Sh23.6 billion, respectively.

In the estimates, National Treasury has provided county governments with Sh391 billion when senators have resolved to allocate the devolved units Sh415.9 billion.

As a result of the budget review, government grants to state corporations have been reduced by 30 per cent.

Treasury has also reduced non-priority expenditures in the recurrent budget by up to 50 per cent.

It has also announced a freeze on foreign travel as among the measures it would take to firm up the austerity steps.

The budget cut would also see government capital projects scaled down by up to 30 per cent, and 25 per cent for donor-funded projects.

“The government will sustain efforts to improve efficiency in public spending and ensure value for money,” Treasury said.

The state seeks to eliminate non-priority expenditures to curb wastage, eliminate leakages and control public expenditure.

Treasury further says it would eliminate unproductive tax incentives as a measure towards rationalising tax expenditures.

President Ruto’s administration is also banking on public-private partnership (PPP) for mega projects.

“…but being mindful of the contingent liabilities that come under this framework,” the brief reads.

Kenya Kwanza also says it would go digital in listing assets and ensure all public procurement is undertaken online.

“Once the system is implemented, it is expected to promote savings of about 10 to 15 per cent of government procurement expenditure, ensure value for money, efficiency, transparency, audit trail and enhance good governance in our public procurement,” Treasury said.

President Ruto’s team further seeks to roll out a project information system for all MDAs.

“All state agencies shall be required to list all the projects in the system,” Prof Ndung’u said.

From the reforms, Treasury says it aims to collect Sh3.35 trillion in revenues in the next financial year, but the expenditure is still higher at Sh3.92 trillion.

This means the government has to borrow Sh514 billion to bridge the deficit, of which it plans to borrow equally from the domestic market and foreign sources.

President Ruto’s team has indicated it would prioritise the implementation of the bottom-up economic transformation agenda (BETA).

At least Sh257 billion has been allocated to the clusters for implementing BETA, including Sh98 billion for infrastructure, Sh85 billion for social, Sh43 billion for finance and production, Sh20 billion for environment and Sh9 billion for governance.

Further, the budget would be implemented in key thematic areas including agriculture, transport, roads, energy, housing, ICT, national security, governance and justice, education, health, manufacturing, social protection, poverty reduction, sports and environment at Sh1.9 trillion.

In sticking with his pledges, President Ruto’s administration has allocated Sh10 billion towards fertiliser subsidy, Sh1.4 billion for sugar reforms and Sh2 billion to settle the landless.

The government is also rearing to spend Sh7.8 billion to acquire land for the construction of public institutions, Sh3.8 billion on 500 SGR wagons and 20 SGR passenger coaches, and Sh1 billion for Nairobi Bus Rapid Transit (BRT).

More than Sh35 billion is set to go towards railway sector improvements including the acquisition of 700 SGR wagons and the overhaul of 1,620 others.

The government seeks to splash Sh178 billion on road projects, including the construction of roads and bridges, and the rehabilitation and maintenance of trunk roads.

Ruto’s administration has also allocated Sh18 billion towards rural electrification and Sh14 billion to geothermal generation, while Sh27 billion would go to the national grid system.

Housing, which is among Ruto’s flagship agenda, has been allocated Sh92 billion while ICT is set to be allocated Sh16 billion.

National Security is among the biggest accounts in next financial year’s budget at Sh373 billion of which Sh168 billion would go to defence.

NIS has been allocated Sh45 billion, Sh109 billion to the National Police Service – besides Sh10 billion for police vehicle leasing and Sh6.5 billion for modernisation and Sh32 billion to prisons.

The office of the DPP has been allocated Sh3.9 billion, the same for EACC, while Sh5.4 billion would be provided to the State Law Office.

Education has been allocated Sh654 billion, of which the Teachers Service Commission has been allocated Sh351 billion.

Of the amount, Sh63 billion has been set aside for free day secondary education, Sh30 billion for Junior Secondary Schools capitation and Sh9 billion for free primary education.

Helb has been allocated Sh32.9 billion while Sh63 billion would go towards supporting university education, Sh22 billion for scholarships to university students and Sh20 billion for Technical and Vocational Education and Training (TVET), besides Sh7 billion capitation for TVET students.

The health sector has been allocated Sh128 billion of which Sh2.5 billion is set aside for community health promoters, Sh4.1 billion for primary healthcare fund and Sh2 billion for free maternity care.

Kenya Kwanza has further set aside Sh36 billion for dams and water infrastructure from its Sh104 billion environment and water budget.

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