The National Treasury is proposing to cut budgetary allocations for the current financial year which ends on June 30 next year by Ksh 42.6 billion or 2.1% of the original budget unveiled by Finance Cabinet Secretary Henry Rotich, who has since stepped aside as he fights to clear his name over the multi-billion Kamwerer and Arror dams scandal.
According to a draft 2019 Budget Review and Outlook Paper seen by Business Today, the expenditure projections for FY 2019/20 have been revised to accommodate the weak revenue performance through trade-offs and reallocations of the existing budgetary provisions supported by austerity measures instituted on less productive areas of spending across the Government.
Treasury projects revenues to stand at Ksh 2.06 trillion or 19.2% of GDP with ordinary revenues at Ksh 1.8 trillion or 17% of GDP.
On the other hand, expenditures are projected at 2.8 trillion or 26.3% of GDP with recurrent expenditures projected at Ksh 1.7 trillion (16.1% of GDP) while development expenditures are projected at Ksh 710 billion (6.6% of GDP). Transfer to the County Government is projected at Ksh 378.4 billion (3.5% of GDP).
“The deficit is therefore projected at Ksh 640.2 billion (equivalent to 5.9 percent of GDP). Excluding SGR, the deficit amounts to Ksh. 602.0 billion or 5.6 percent of GDP. The fiscal deficit in FY 2019/20 will be financed by net external financing of Ksh 331.3 billion (3.1 percent of GDP), Ksh 305.7 billion (2.8 percent of GDP) from net domestic borrowing and other net domestic receipts of Ksh 3.2 billion,” it says.
According to Treasury, the Medium Term Fiscal Framework (MTFF) for the FY 2019/20 emphasises on efficiency and effectiveness of public spending and improving revenue collection to ensure the debt position remains sustainable while at the same time supporting rapid and inclusive economic growth and continued fiscal discipline.
It adds the underperformance in both revenue collection and expenditure in the FY 2018/19 has implications on the financial objectives outlined in the 2019 BPS and the 2019/20 Budget.
In particular, the baseline for projecting both the revenue and expenditures for the FY 2019/20 and the medium term has changed given the outcome of FY 2018/19 and the first two months of FY 2019/20.
“In light of these challenges, the revenue projections for FY 2019/20 have been revised taking into account a lower projection base (on account of the Ksh 123.5 billion shortfall in FY 2018/19), revenue performance by end August 2019 and the amendments to the Finance Bill 2019.
Fiscal consolidation plan
Recently, Acting Cabinet Secretary Ukur Yattani said the Government had initiated a number of revenue and expenditure measures in line with its fiscal consolidation plan including budget rationalisation on non-core expenditures, which include foreign and domestic travel and hospitality.
Others to face the chop are expenses for training, communication supplies, printing and advertising, purchase of furniture, office and general supplies, use of government vehicles, and size of government delegations in meetings outside the country.
“In this regard the Government will be issuing directive on this matter in due course,” Yattani said on Thursday during the launch of the preparation of the FY2020/21 and the Medium-Term Budget process at KICC in Nairobi. “The cuts will be brutal and will be sustained,” he added.
Rotich was variously castigated for being too ambitious with his budget measures and in the process overburdening Kenyans with taxation amid a borrowing spree.