President William Ruto’s administration must eliminate waste to meet its 2024-25 budgetary plans, according to experts. The Treasury faces challenges balancing recurrent and development expenditures for the current financial year ending June 30, 2025, amid significant budget cuts due to the collapse of the Finance Bill 2024, which could halt development projects.
The government is also grappling with the country’s high debt, expected to rise further with planned borrowing to bridge the budget deficit, even after the Treasury proposed reducing the 2024-25 budget to Sh3.87 trillion from Sh3.99 trillion in its Supplementary Budget before Parliament.
The 2024-25 budget was to be funded through additional revenue measures amounting to Sh344.3 billion contained in the Finance Bill 2024, which President Ruto declined to assent to following public protests.
Under the new estimates, the Treasury has proposed cutting national government ministerial expenditure by at least Sh156.4 billion to Sh2.2 trillion, with development estimates expected to decrease to Sh623.9 billion from Sh746.3 billion.
The budget cuts are expected to impact development projects, mergers of state agencies with duplicating roles, and reduce allocations to counties as part of President Ruto’s plan to “live within means.” However, financial experts warn that Kenyans may still lose out on development if fiscal discipline is not maintained.
“Fiscal discipline has been a significant challenge in Kenya, leading to waste. Additionally, oversight, especially by Parliament, has been lacking, exacerbating the problem,” said John Kinuthia, senior programs officer at the International Budget Partnership (IBP Kenya), now Bajeti Hub.
According to the institution, the government will still be expected to deliver some development projects despite the cuts, highlighting the need to strengthen Public Finance Management (PFM) systems to enhance budget effectiveness.
“There will still be a development budget and we expect the government to also borrow slightly higher than the initial target and that will go towards development funding as required by the PFM Act,” Kinuthia explained.
While Kenya has previously borrowed to bridge budget deficits, including funding development, there have been concerns of wastage and corruption within government institutions, which has seen the public fail to reap the benefits.
“The budget deficit remains elevated, particularly due to heavy debt service obligations and bloated budgets for MDAs (Ministries, Departments and Agencies),” data analyst, Mihr Thakar, said.
Among demands in the ongoing anti-government protests is for President Ruto to deal with corruption within his government, and get right leadership in his Cabinet, after last week’s dissolution.
“It is a bold decision, a big one but we have to wait and see how the new cabinet will try to undo some of the economic challenges faced by the country today,” said Peter Macharia –CEO of digital lending firm, Jijenge Credit limited.
Indeed, economists keenly following the new developments are optimistic Ruto’s promise to form a new unity government can deliver stable economic policies to revive growth, but are cautious about how the awaited new Cabinet can reconcile stark ideological differences.
The government however has an opportunity to delay the implementation of some development projects that can be staggered to coming years, according to IBP Kenya.
“This is possible for development projects funded domestically and in non-essential services. Donor projects may however be difficult to move if their funding is earmarked,” said Kinuthia.
Poor public finance management and low development remain significant concerns in counties, exacerbated by delayed disbursements that hinder budget execution, particularly for development projects. Contractors often lack the capacity to deliver projects on time and with the required quality, further impacting development.
“There are additional challenges, such as late approval of policies, missed revenue targets from own sources, and highly centralized procurement systems that create bottlenecks in the procurement process,” noted the International Budget Partnership (IBP).
Most county allocations are directed toward recurrent expenditures, primarily salaries. Senators have raised concerns about “massive wastage” in the government and loopholes that need addressing before cutting funding to essential areas. Last week, Nairobi Senator Edwin Sifuna highlighted the need to curb government wastage and extravagance and redirect funds to reduce the budget burden on the public.
The National Treasury has submitted the Supplementary Estimates for the Financial Year 2024-25 (recurrent and development), along with the Programme-Based Budget and the Memorandum on the estimates, for Parliament’s consideration.
The aim is to rationalize the 2024-25 budget estimates to align with the revised fiscal framework and implement expenditure cuts across the three arms of government, constitutional commissions, and independent offices.
“The Budget and Appropriation Committee is required to guide the process, seek public views, and report to the House by July 24, to enable subsequent consideration of the Supplementary Estimates,” Speaker Wetangula said in a standing order.
Despite the budget cuts, the Treasury must ensure prudent management of fiscal risks. To support businesses, the Budget and Appropriation Committee has proposed that verified pending bills be prioritized for payment within the approved fiscal framework and reported to the National Assembly quarterly. The committee also recommends that fiscal consolidation efforts should not target social safety net programs.
Treasury PS Chris Kiptoo stated that the government will continue reviewing its macroeconomic forecasts and their budget implications.
“Potential fiscal risks from contingent liabilities, including those from Public-Private Partnership projects, have been accounted for with a contingency provision to cushion the economy from unforeseen shocks,” Kiptoo said.
He also mentioned ongoing tax reforms aimed at modernizing and simplifying tax laws to improve the tax revenue base.
