Despite earlier directing the Treasury to cut Kenya’s total spending for the current financial year by Sh346 billion, President William Ruto on Sunday claimed borrowing by the State would increase by Sh1 trillion following the withdrawal of the Finance Bill 2024.
“We have dropped the Finance Bill. What does that mean? It means we have gone back almost two years. It means that this year, we are going to borrow Sh1 trillion to be able to run our government,” said Dr Ruto.
Interestingly, even after saying that borrowing would increase, from the initial target of Sh597 billion to Sh1 trillion, the President still claimed that the rejected Finance Bill would have huge consequences on certain expenditures the government had lined up.
“It means we will not confirm the JSS (Junior Secondary School) teachers, 46,000 of them; it means we cannot support the farmers with Sh2 billion for us to make sure that farmers get a fair return of Sh50 per kilo per milk; it means cannot sort out the coffee debt; it means we cannot support the cherry,” said the President.
Other victims of the decision by the government to shelve the finance billion from widespread protests include sugar cane farmers in Mumias, said the head of state. He added that Kenya will continue importing potatoes, to the chagrin of local producers.
Additionally, in the same interview, President Ruto agreed with the push to scrap the controversial offices of the First Lady as well as those of the spouses of Deputy President Rigathi Gachagua and Prime Cabinet Secretary Musalia Mudavadi.
But with the conflicting statements, the President has only added more confusion on the budget for the fiscal year starting this month.
The budget is a balancing act. The expenditure and revenue sides have to balance. On the expenditure side, is the spending by the national government (Executive, Parliament, and Judiciary) and the 47 counties. And on the revenue side, there are taxes, non-tax revenues, grants, and loans.
If the President increased the borrowing target to Sh1 trillion, the country’s total spending would remain at Sh3.997 trillion. Increasing the borrowing by Sh403 billion to Sh1 trillion would mean a Sh57 billion increase in the size of the budget.
But on June 28, when President Ruto passed the Appropriations Bill, which he said would “guarantee continuity of government operations, especially in providing critical services,” he had a different perspective. He did not talk of the government increasing borrowing, but he talked of reducing expenditure including by his office.
“I have therefore assented to the Appropriations Bill 2024 and instructed the National Treasury to immediately prepare supplementary estimates to reduce expenditure by the amount of revenue that was expected to be generated by the rejected Finance Bill,” said Ruto in a statement.
“The reduction in expenditure, amounting to Sh346 billion, will be borne eaquitable by both levels of government: the national and county governments. With respect to the national government, the reduction will be borne by the Executive, the Legislature, the Judiciary, and our constitutional commissions,” added the head of State.
In his speech, while rejecting the Finance Bill on Wednesday last week, President Ruto had called for expenditure cuts to cover the expected shortfalls in revenues, including allocations to the Executive.
Dr Ruto, whose administration has come under pressure for wasteful spending since the anti-tax protests started, directed for implementation of austerity measures that would involve expenditure cuts affecting all levels of government.
“I direct that operational expenditure in the Presidency be reduced to remove allocations for the confidential vote, reduce travel budget, hospitality and purchase of motor vehicles, renovations, and other expenditures,” he said.
The Finance Bill 2024, which has since been withdrawn following widespread protests that left scores dead, had intended to raise an additional Sh346 billion through various tax measures including the introduction of a 2.5 percent motor vehicle tax, the raising of excise duty on airtime and mobile money transfer fees.
Other tax measures in the condemned Finance Bill include the introduction of value-added tax (VAT) on bread, and increased excise duty on alcoholic beverages, cigarettes, and gambling. There was also a new eco levy that was to be applied on finished imported goods that were deemed harmful to the environment.
In total, the government was expected to collect Sh2.913 trillion in taxes in the current financial year ending July next year to fund the Sh3.997 trillion budget. Non-tax revenues—fees and fees from state bodies—were expected to raise Sh426 billion. The budget hole of Sh597 billion was to be plugged using loans from both domestic and foreign lenders.
