The government has been forced to shelve plans to spend nearly Sh1 billion on new vehicles following the withdrawal of new and higher taxes for the current financial year ending June 2025.
Documents tabled in the National Assembly show the suspension of the purchase of new vehicles and other transport equipment will hit 46 public offices, including the State House.
The mini-budget, which is awaiting lawmakers approval, will see the government departments and agencies lose out on Sh917.85 million which had been allocated to acquire new vehicles, and a further Sh9.59 million for routine maintenance for four offices.
The Treasury has proposed the removal of the budgets for new vehicles in line with President William Ruto’s directive on July 5 that spared purchases for security agencies.
Unrelenting youth-led demonstrations over tax raises, elevated living costs, and bad governance prompted Dr Ruto to withdraw the Finance Bill 2024, leaving a Sh346 billion budget hole which has necessitated a raft of expenditure cuts.
The scrapping of the budgets for the purchase of motor vehicles will likely deepen the woes of car dealers and assemblers, which have endured flagging sales for two years running.
Analysis of the supplementary budget shows that the State House, the seat of power, will be amongst the biggest losers after the Sh120.72 million earmarked for new vehicles was withdrawn.
Dr Ruto’s office has lost Sh50.22 million, leaving it with only Sh2.1 million for new cars. Other offices within the State House whose car budgets have been slashed include First Lady Rachel Ruto (Sh50 million), Secretary to the Cabinet Mercy Wanjau (Sh14 million), and President’s Women Rights Advisor Harriette Chiggai (Sh6.5 million).
Offices under Deputy President Rigathi Gachagua have lost out on Sh100 million for new cars, while those under the Office of Prime Cabinet Secretary, Musalia Mudavadi, will not get Sh90 million.
The State Law office is, however, the biggest casualty after the Sh186.03 million budget earmarked for new cars at the headquarters and its offices at the counties was removed. Other major losers include the Office of the Clerk of the Senate (Sh55 million), Teachers Service Commission (Sh46.35 million), Office of the Auditor-General (Sh45 million), Parliamentary Service Commission (Sh40 million), and Judicial Service Commission (Sh29.7 million).
The Treasury document, however, shows that the budget for the Office of the Clerk of the National Assembly will retain Sh80 million out of Sh100 million that had been allocated in the initial estimates.
The withdrawal of the Finance Bill 2024 has scuttled the Ruto administration’s initial plan for “a balanced budget by 2027” in a deal with the International Monetary Fund (IMF).
The administration was banking on the new taxes and expenditure cuts, largely targeting non-essential expenditures such as hospitality and renovation of offices as well as slashing allocations for Semi-Autonomous Government Agencies, to achieve its fiscal consolidation targets.
The plan involved reducing the budget deficit from 5.7 percent of gross domestic product, a measure of economic output, in the last financial year to 3.3 percent of GDP in the financial year starting this July.
This was partly to comply with an IMF programme that requires Kenya to increase taxes as well as cut expenditures to keep the deficit at minimal levels.
“President Ruto has, so far, not been clear on how he expects the budget deficit will evolve further out. But it’s clear that more tightening will be needed to stabilise the debt ratio, let alone to get it to fall,” David Omojomolo, Africa economist for UK-based Capital Economics, wrote in the latest note on Kenya.
“The IMF so far is keeping its cards close to its chest on what this means for Kenya’s programme. Its official statements have been vague, probably because, like Kenya, the Fund has few good options. Doing nothing, though, risks signalling to other IMF recipients that there is no jeopardy from fiscal slippage.”
