The office that advises Members of Parliament on budget planning has raised doubts about the ability of the Kenya Kwanza administration to fund its ambitious economic growth and job creation plan while enforcing spending cuts.
The Parliamentary Budget Office (PBO) says that President William Ruto’s administration will struggle to fully implement the interventions whose cost it estimates at Sh2.67 trillion in the five years to 2027 given the government’s current financial constraints.
Kenya’s exchequer is weighed down by fast-maturing debts for loans used to fund big infrastructure projects, squeezing funds for development projects.
An estimated 60 percent of the tax collections are currently being used to pay the debt, prompting Dr Ruto to declare his administration will slow down on borrowing.
The new administration rode to power on the promise of helping lower the cost of living, creating jobs, and turning around the fortunes of sectors such as agriculture and small and medium enterprises (SMEs).
“The proposed fiscal consolidation plan is laudable. However, cutting expenditure in the existing fiscal framework while accommodating the cost of implementing the manifesto proposal may prove an arduous task,” the PBO says.
The Kenya Kwanza administration has targeted the construction of roads, education, SMEs, agriculture and health as key sectors to create jobs and spur economic growth.
The trillions needed highlight the stern test facing Dr Ruto’s administration amid high rates of unemployment and loan repayment obligations, with an estimated 60 percent of the revenue collections being used to service debt.
The PBO’s analysis shows Sh823.3 billion is needed to fund the construction and refurbishment of roads in five years. This is key to easing market access for farm produce and helping cut on losses that farmers are grappling with due to poor roads in some parts of the country.
An estimated Sh635.3 billion is required for the education sector and will be used to recruit 190,000 and 100,000 teachers for secondary and primary schools respectively and build technical training institutions, among others.
A further Sh397.7 billion is needed to spur the SME sector through the provision of credit facilities like the Hustler Fund, and Sh259 billion and Sh250 billion for the health and agriculture sectors respectively.
The new government targets hiring an estimated 3,895 community health workers and 4,000 nurses, clinical officers and laboratory technicians every year until 2027.
The Sh250 billion for agriculture will be used to fund a crop and livestock insurance scheme, provide Sh50,000 to every poor farmer and subsidise inputs such as fertiliser.
The new administration is already pushing to slash Sh300 billion from the current budget in a bid to curb wastage and free up funds to needed to fulfill the election promises.
The entire budget of foreign travel, training and purchase of motor vehicles and furniture has been scrapped, making them the first casualties of the new administration's attempt to tame runaway wastage.
The Treasury also cut the budgets of domestic travel, advertising, hospitality, vehicle rentals and communication by 75 percent in a bid to reduce the Sh1.18 trillion recurrent budget of the current financial year by at least one quarter.
The cuts are aimed at reducing the need to borrow Sh862.5 billion to plug the hole in this year’s budget that stands at Sh3.3 trillion.
The huge expenditure on debt repayment has also forced the government to fund development projects through loans.
The billions needed every month to pay debt have overshadowed the significant increase in tax collections by the Kenya Revenue Authority, which has been forced to aim higher to match the needs.
The new administration has declared plans to slow down on the expensive commercial debt and instead pursue cheap concessional loans and reduce borrowing from the domestic market in a bid to ensure credit flow to the private sector.
Dr Ruto has already said that the government will tap private firms to build dams and drill water on a large scale, then sell the commodity to State water agencies who will supply it to consumers at lower charges.
But the PBO warns that the government must cautiously approach public-private partnership (PPP) deals to guard against contingent liabilities besides delays in the execution of the projects.
“Interventions to be undertaken through PPP require a cautious approach. Experiences from previous arrangements have revealed challenges in terms of timelines, cost and institutional rigidities,” the PBO says in the analysis.