President William Ruto has directed the National Treasury to reduce the 2022/23 budget by Ksh.300 billion in order to relieve Kenya’s spending and borrowing pressures.
President Ruto said in his address to a joint Parliamentary sitting on Thursday that the spending cuts are based on reducing the government’s borrowing needs from an estimated Ksh.900 billion in the fiscal year to close the financing gap.
“We should never borrow to finance recurrent expenditure. It is not right, prudent or sustainable. It is simply wrong. We must bring ourselves and our country to sanity,” President Ruto told MPs and Senators.
“To this end, I have instructed Treasury to work with Ministries to find at least Ksh.300 billion in this year’s budget so that we can remove it because the market cannot sustain the kind of borrowing we are doing as government.”
According to National Treasury data, spending for the fiscal year 2022/23 is expected to be Ksh.3.358 trillion, while revenues are expected to be Ksh.2.462 trillion.
This will leave a financing gap of Ksh.862.9 billion, which will be filled with Ksh.280.7 billion in next foreign financing and Ksh.582.2 billion in net domestic financing.
Ksh.2.271 trillion of the Ksh.3.4 trillion budget is estimated to be recurrent expenditure, which includes spending by ministries in addition to capital allocations.
Kenya’s public debt is expected to rise from Ksh.8.6 trillion at the end of June this year to Ksh.9.4 trillion by June 2023, leaving a shortfall of Ksh.600 billion to the Ksh.10 trillion debt ceiling.
On revenue mobilization, President William Ruto has proposed tax reforms, including a culture change at the Kenya Revenue Authority (KRA).
“The tax burden must reflect ability to pay. Those at the bottom of the pyramid should pay what is proportional. We will be proposing tax measures that begin to move us towards the right direction,” President Ruto added.
