Austerity Measures to be sustained in the Kenyan Budget in 2018/2019
Henry Rotich, the Cabinet Secretary for Finance is planning to implement austerity measures in order to raise funds for Uhuru Kenyatta’s “Big Four” agenda as well as control the ever increasing public debt.
With the austerity measures, it means that there are tough times ahead for Ministries, departments and Agencies. In one word these are referred to as MDAs. This new state of affairs has been due to under-performance of tax collection. For instance between July and November 217, the Kenya Revenue Authority (KRA) raised Ksh. 508.70 billion from taxes. This was a 7.36% increase but the national government is likely to fail in meeting its Ksh. 1.44 trillion target.
The Cabinet Secretary for Finance has vowed to implement austerity measures between Jan to June 2018 in order to free funds for Jubilee’s flagship projects. This means that MDAs will have to justify why they need money and what contributions will their expenditure have on the economy. It’s going to be tough.
The CS for Finance noted that the national Treasury is going through the budget with a toothpick to ensure they arrest any wastage. He further revealed that the treasury has adopted “zero-base budgeting” as they prepare to formulate the budget for financial year 2018/2019.
During the coming financial year, we are likely to witness fiscal consolidation or budget cuts. This may free some resources to be spent on key sectors that will have a bigger impact on Kenya’s economy and create more jobs.
President Uhuru Kenyatta wants to leave a legacy by investing in the following four sectors: food security, healthcare, manufacturing, affordable housing.
The KRA is working closely with the national treasury to point out the point of leakage in order to turn around revenue performance.
KRA is already playing tough with firms which are not complying with laws and regulations such as Pay as You Earn (PAYE) and others. Compliance is key to hitting tax targets.
Unplanned expenditures during the fresh elections, food subsidy programme and unresponsive donors are contributors to Kenya’s budget deficit (the difference between budget and actual revenues). When there is a budget deficit, it is bridged through loans (borrowing) hence bulging public debt which is already large. The most recent statistics indicate that public debt stood at Ksh. 4.48 trillion as at Sep 2017. This was a huge increase compared to Ksh. 1.89 trillion in 2013 when the Jubilee administration took over power from President Mwai Kibaki.
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