The National Treasury has ordered “brutal” budget cuts in light of a revenue shortfall of Ksh 91 billion and rising expenditure pressures.
Acting Cabinet Secretary Ukur Yattani said in order to contain the resultant fiscal gap, the government has initiated a number of revenue and expenditure measures in line with the 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.
The CS noted that FY2020/21 Budget will be prepared against a background of subdued global growth, adding that according to the latest IMF forecasts, global growth is projected at 3.2% in 2019 though slightly expected to pick up to 3.5% in 2020.
He said although Kenya’s economic growth has remained strong and resilient, there is need to be cautious taking into account the emerging global challenges that could result into external economic shocks that may significantly affect our economy.
In the face of the slowdown in global growth, Yattani said the government has adopted an all inclusive fiscal consolidation policy package, encompassing fiscal, monetary, and financial policies.
How Treasury intends to reduce budget deficit
Going forward, as a proportion of the GDP, the National Treasury expects the budget deficit to reduce to 3.5% of GDP in 2022/23 from a high figure of 7.7% of the GDP in 2018/19.
He added the FY 2020/21 and the Medium-Term Budget will continue to be anchored on the third Medium Term Plan (MTP III) and will build on the progress made in the previous financial years.
“In nominal terms, spending will be maintained at the current levels. The Government will commit to gradually reduce spending from 25.3% of GDP in 2018/19 to around 23% of GDP in 2022/23, in line with the fiscal consolidation policy which has been in force over the last two financial years,” said Yattani.
According to Yattani, who doubles as Labour CS, medium-term Budget will be premised on achieving economic growth rate of 7% over the medium-term; increasing revenue collection to 18% of the GDP and maintaining spending at 23% of the GDP and Reducing budget deficit to about 3.5% of the GDP; (v) Containing the public sector wage bill to below 6% of the GDP.
The government will also seek to maintain the current policy of reorienting expenditures to the Big Four Agenda; restructuring/reforming semi-autonomous government agencies including public universities and eepening robust governance measures across the entire public sector to eliminate pilferage and wastage of public resources.
The government has already ordered parastatals not to implement capital projects unless they first receive approval from the National Treasury.