Treasury cuts 2020 budget by nearly 24 percent

The National Treasury has slashed and lowered public spending in the next fiscal year by 24 percent.

According to the 2020 budget policy statement, the 2020/2021 national budget has been capped at Ksh 2.7trillion, with development spending having been slashed by 19.6% to Ksh 587.3 billion.

Cabinet secretary to the national treasury, Ukur Yatani is expected to read the annual budget statement that will outline the spending and taxation measures to be implemented during the 2020/2021 fiscal year that will begin in July.

But the annual ritual has over the last seven years seen public spending and budget deficits expand to levels that the national treasury cabinet secretary now concedes to be unsustainable.

Yatani’s determination to tame public spending has now found formal expression in the 2020 budget policy statement which proposes to cut down the national budget by 23.6% to Ksh 2.74 trillion.

Recurrent spending for the year 2020/2021 has been capped at Ksh1.78 trillion, denoting a 1.2% increase from the 2019 recurrent budget of Ksh1.76 trillion.

Development spending will however go down by 19.6 % to Ksh 587.3 billion.

County governments will also have to make do with less funding from the national government, as the national treasury will transfer just under Ksh 375 billion, compared to the current fiscal year’s Ksh 378.3 billion. The contingency fund will remain unchanged at Ksh 5 billion.

With regards to how the Ksh 2.7 trillion budget will be financed, the national treasury aims to collect Ksh 2.13 trillion out of which the Kenya revenue authority is expected to collect Ksh 1.85 trillion. This will be slightly below the current target of Ksh1.87 trillion which the taxman has missed by Ksh 33.3 billion.

Appropriations in aid – which refers to revenues collected at source by individual ministries, departments and agencies – have been projected at Ksh 277.4 billion.

In regards to this, expenditures, as a share of Kenya’s gross domestic product, are projected to decline from 26% in the FY 2018/19 to 23.6% in the 2020/21 fiscal year and further to 21.8 % in the FY 2023/24.

On the other hand, revenues as a share of GDP is projected to remain at 18.4% in the medium term.

The treasury is however faced with a financing gap of Ksh 571.2 billion shillings (equivalent to 4.9% of GDP) in the 2020/2021 fiscal year; a 13% reduction from the current deficit of Ksh 657.3 billion.

this is how that gap will be financed to borrow 345 point 1 billion shillings from foreign sources whilst 222 point 9 billion shillings will be borrowed domestically.

The government is currently implementing a raft of tax policy measures through the tax amendment law and the finance act, 2019 that are expected to yield an extra 62.1 billion in tax revenues.

Further, the newly established public investment management (PIM) unit at the national treasury is expected to streamline the initiation, execution and delivery of public investment projects.

It is also mandated to curtail runaway project costs, eliminate duplication and improve working synergy among implementing actors for timely delivery of development projects; measures the national treasury will put the country’s finances into a more realistic path to growth.

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