Treasury secretary Henry Rotich. PHOTO | SALATON NJAU
What you need to know:
Infrastructure, education, health and social safety net will be given a priority in the 2016 Budget as well as preparations for next year’s General Elections.
The Cabinet has warned that expenditure will be scrutinised to align with government’s economic agenda.
The government has lately increased spending on construction of key infrastructure, including a modern standard gauge railway, roads and power plants, pilling pressure on the budget.
The Cabinet has picked four expenditure areas as the Treasury prepares to roll out a 2016 austerity budget amid persistent shortfalls in revenue collection.
Infrastructure, education, health and social safety net will be given a priority in the 2016 Budget as well as preparations for next year’s General Elections even as the government targets to close the gap between revenue and expenditure to below four per cent of the gross domestic product (GDP).
“In this respect, this fiscal framework presents revised expenditure ceilings to reflect the emerging realities of a very tight resource envelop that will be shared between the national government and the counties,” the Cabinet said in a statement following a meeting at State House on Tuesday.
It further said: “In addition, expenditures will be scrutinised carefully to ensure quality and alignment to the government economic agenda as outlined in the Medium Term Plan (MTP) and the strategic interventions of national interest.”
The government has lately increased spending on construction of key infrastructure, including a modern standard gauge railway, roads and power plants, pilling pressure on the budget.
The deficit for this fiscal year is expected to decline to Sh522.3 billion, about 8.1 per cent of GDP, from Sh569.2 billion, 8.7 per cent of GDP, where it was set in a June budget, the Treasury said in the draft budget policy statement.
The government is currently facing challenges in financing its key programmes due to revenue collection shortfalls, indicating how difficult it will be to finance the Sh2.1 trillion budget.
The Kenya Revenue Authority missed its half-year tax collection targets by a massive Sh47.6 billion, signaling a possible widening of the budget deficit with far-reaching consequences on the economy.
“Cabinet called upon all ministries, departments and agencies to desist from bursting their ceilings through additional resource requests considering the light funding scope for the budget,” the statement by the Presidential Strategic Communication Unit said.
The budget policy statement released last week by the Treasury indicated that the shortfall mainly arose from a dip in payroll taxes and delayed application of the Excise Duty Act 2015.
The Treasury said there was a huge shortfall in ordinary revenue collection as a result of a Sh26 billion deficit in pay-as-you-earn revenue and a Sh15.9 billion shortfall in value added tax collection from imports.
The statement did not provide the actual half-year ordinary revenue targets but said that by the end of December 2015, the total cumulative revenue amounted to Sh575.2 billion against a target of Sh642.9 billion.
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