Kenya: Budget Cuts to Hit Ministries, Parastatals

16 January 2020

Ministries, state parastatals and departments face tough times ahead as the government moves to cut spending by an estimated Sh100 billion in the financial year beginning July to reflect depressed tax revenue streams.

Treasury Cabinet Secretary Ukur Yatani Wednesday said that all government entities must live within their means, which is expected to reduce spending on non-essentials such as travel, advertising and entertainment perks.

While addressing a meeting to prepare the government's 2020/2021 budget, the CS added that those were part of the plans to mitigate the funding deficit, which currently stands at an estimated Sh600 billion, attributable to the state's borrowing to finance development amid unmet revenue targets.

"We are sustaining the austerity measures that we put in place this financial year. If we had a choice, maybe we would have relooked at it but we do not have much because we need money to invest in capital goods in areas that will grow the economy, that is why we will be lean on recurrent expenditure," Mr Yatani said.

"We must have discipline. You will not have ulcers because you have not travelled. We will continue to pursue fiscal consolidation and will only give what we can afford. What KRA collects is what we intend to use as we have exhausted other means," Mr Yatani said.

The austerity measures were first announced in September last year and targeted trips, training and advertising as the government moved to curb wastage.

Mr Yatani had, while warning of the budget cuts, singled out foreign trips, which often involve hefty travel allowances and huge entourages, and hospitality or entertainment by government departments, as examples of wasteful spending.

Treasury data shows that ordinary revenue as a share of GDP has also been progressively declining, falling from 18.1 per cent in 2013/2014 to 15.7 per cent in 2018/2019, forcing the government to borrow more to plug the deficit.

Shortfalls in revenue collection have widened the country's budget deficit, which has then been bridged through increased borrowing to raise funds to meet the government's recurrent expenditure and infrastructure projects such as roads, bridges, power plants and transmission lines.

The economy is currently hurting from slow growth characterised by high job losses, forcing the Treasury to cut its 2019 economic growth estimate to 5.6 per cent from an initial 6 per cent as a result of a slowdown in the growth of the agricultural sector.

The Jubilee administration has been accused of saddling taxpayers with huge debts, but it has defended its massive borrowing, saying that the country needs money for infrastructure, especially roads and railways.

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