Economy

Treasury exceeds spending by Sh 65.5 billion in first quarter

njuguna

Treasury Cabinet Secretary Prof Njuguna Ndung’u at a press briefing on November 10, 2022. PHOTO | DIANA NGILA | NMG

Government expenditure for the first quarter exceeded the projection by Sh 65.53 billion, widening the hole in the budget that is filled by borrowing.

The latest quarterly disclosures by the Treasury show expenditure and net lending amounted to Sh 759.52 billion in the July-September 2022 period against an estimate of Sh 693.98 billion.

The cost of running the government — including salaries, operations and maintenance costs — overshot the target by Sh 57.03 billion to Sh 573.29 billion.

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“The over expenditure in the recurrent category was mainly due to higher than targeted expenditures in operations and maintenance,” the Treasury wrote in the provisional expenditure and budget review report for the first quarter of the current year.

The operation and maintenance costs in the three months exceeded the budget by Sh 92.95 billion, the Treasury says, after the expenses hit Sh 260.67 billion. The over-expenditure widened the budget deficit, including grants, for the quarter from Sh 41.52 billion to Sh 174.32 billion.

The above-target budget will put the new regime of President William Ruto on the back foot in the plan to slash the full-year recurrent expenditure by at least a quarter to ease debt.

Dr Ruto has directed the Treasury to work with other ministries to reduce the nearly Sh 1.18 trillion recurrent budget by at least Sh 300 billion.

The plan, he says, will reduce the need to borrow Sh 862.5 billion to plug the hole in the Sh 3.3 trillion budget for this financial year ending June 2023.

The savings from what promises to be the deepest and most brutal budget cuts in decades will ease the pressure on borrowing “because the market cannot sustain the kind of borrowing we are doing as government”.

“The government should never borrow to finance recurrent expenditure. It is not right, it is not prudent, and it is not sustainable. It is simply wrong. We must bring ourselves and our country to sanity,” said Dr Ruto in his inaugural address to Parliament a joint sitting of the National Assembly and Senate end-September.

“Over the next three years, we must reverse this and go back to a situation where the government contributes to national savings effort by keeping recurrent expenditure below revenue levels.”

The proposed cuts are largely targeted at less essential expenditure on items such as domestic and foreign travel, expensive luxurious cars for top government officials, entertainment, training and publicity.

Other budgets set to be chalked off include gifts, flowers and tea in government offices.

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The cuts will accompany a freeze in hiring and salary increases for public servants, which may go against the new administration’s campaign pledge to improve the pay for security workers such as police officers.

“We intend to contain growth in non-priority expenditures so as to reduce the fiscal deficit that will support a reduction in the growth of public debt to ensure sustainability,” Treasury secretary Njuguna Ndung'u said on November 10.

“The [fiscal consolidation] policy’s main objective is to free resources to growth-enhancing programmes by gradually reducing the overall fiscal deficit and the pace of debt accumulation.”

Dr Ruto has said that increased government borrowing has “undermined the business sector contribution to the national savings and investment efforts” and that reduced borrowing “will address the problem of crowding out the private sector from the credit market”.

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