State departments, county governments and MPs are bracing for budget cuts as the National Treasury targets recurrent expenditure in a supplementary budgetseeking to plug a Sh600 billion budget deficit.
The Government has already frozen development expenditure and introduced a 16 per cent value added tax (VAT) petroleum products in an effort to channel scarce revenues to servicing debt repayments.
However, this is not enough to help the country dig itself out of the short-term debt distress it is currently experiencing, especially with Parliament due to reduce the VAT to eight per cent, halving the Sh70 billion the Kenya Revenue Authority (KRA) hoped to net from the levy.
“I have proposed wide-ranging cuts in spending as well as austerity measures across all arms of Government,” said President Uhuru Kenyatta during last week’s State of the Nation address, adding that the cuts targeted non-priority spending such as hospitality, foreign and domestic travel, and training and seminars.
“These budget cuts ask of us in Government that we tighten our belts. It also ensures that the sacrifices made by tax-compliant Kenyans are matched by discipline from all of us in the public service.”
According to a breakdown seen by The Standard, some of the areas earmarked for budget cuts with the aim of saving Sh52 billion are a Sh3.8 billion reduction in the Equalisation Fund used to cushion budget shortfalls in marginalised areas.
Another Sh8.7 billion will be cut from various road development agencies. The funds are meant for emergency rehabilitation of roads and infrastructure damaged by long rains experienced across many parts of the country earlier this year.
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Legislators will also feel the pinch as Treasury is set to cut Sh5 billion from allocations to the National Assembly and Senate, with another Sh6 billion to be axed from the Government’s Constituency Development Fund.
In addition, Sh5.5 billion targeted for capacity building in the digital literacy programme will be scrapped alongside Sh2.6 billion for Last Mile Connectivity programme and electrification of public facilities.
The cuts come amid a cash crunch in countygovernments that are yet to receive allocations from the national government even as the first quarter of the 2018-2019 financial year lapses in less than two weeks.
Earlier this month, 15 counties appealed to the Government for funds to avert a crisis but received only Sh4 billion, less than five per cent of the Sh314 billion meant for the 47 counties in the current financial year.
Treasury has budgeted Sh963 billion under the consolidated funds services, with Sh870 billion for servicing debt repayments, Sh2.4 billion for salaries and allowances and Sh90 billion to pay pensions and gratuities.
As at July 31, only Sh71 billion had been disbursed through the Consolidated Fund, with Sh68 billion of this going to debt repayment. In last year’s preliminary budget report, Controller of Budget Alice Odhiambo signalled that Kenya’s debt repayments were taking up a larger share of the Consolidated Fund, leaving little room for meeting pension and salary payments.