President William Ruto’s administration plans to cut borrowing and raid taxpayers for more money to fund Sh3.64 trillion budget that promises to increase development spending by a third.
The draft budget policy statement for 2023, which promises to deliver economic recovery and inclusive growth, shows that Kenya Kwanza’s maiden budget for the financial year starting July 1 will increase by Sh251 billion from the current Sh3.39 trillion.
The proposed seven percent growth will mark the slowest rise in government spending in four years since 2019/2020 when the budget rose by five percent to Sh2.57 trillion.
Treasury projects that total revenue will hit Sh2.897 trillion in the financial year 2023/2024 from the current financial year’s Sh2.51 trillion, with Kenya Revenue Authority (KRA) expected to raise Sh2.66 trillion.
KRA’s collections, which will be Sh375 billion more than the current year’s expected Sh2.19 trillion will be supplemented by Sh331.7 billion from the ministries and other state agencies.
The proposed tax collections hint at expanding the tax base or hitting the current taxpayers with increased or new taxes.
KRA on Tuesday published proposals to increase taxes on items such as beer, cigarettes, water, juices, and beauty products.
The Treasury projects that the taxable base in the informal sector is Sh2.8 trillion and believes that bringing more people and businesses under the tax bracket will offer a boost to the tax basket.
“Revenue performance will be underpinned by the ongoing reforms in tax policy and revenue administration measures geared towards expanding the tax base,” says Treasury.
President Ruto’s administration hopes to receive Sh48.1 billion in grants, 71 percent more than the Sh28.1 billion that is projected in the financial year ending June 2023.
Kenya then plans to borrow Sh695.2 billion to plug the deficit into the budget.
The borrowing will be Sh154.2 billion or 18 percent lower than the current year’s projected borrowing of Sh849.2 billion.
“This reduction will result in a reduction in the growth of public debt thereby boosting the country’s debt sustainability position,” says Treasury.
Treasury’s draft shows Sh198.6 billion will be borrowed from external lenders while Sh496.6 billion will be borrowed in the domestic market from lenders such as banks, insurance firms and individuals through Treasury bills and bonds.
The cut on borrowing could start in the current financial year if the President makes good on his promise to cut Sh300 billion from the current year’s borrowing plan. This will require a supplementary budget.
Recurrent spending, most of which is used to pay salaries, is projected at Sh2.422 trillion, a Sh70 billion rise from the current year’s Sh2.352 trillion.
The development budget is expected to rise by 33.5 percent from the current year’s Sh596.66 billion to Sh796.4 billion as Dr Ruto hopes to fulfil his election pledges.
According to the Treasury, public spending will be directed towards “the most critical needs of the country” to achieve economic recovery and inclusive growth.
Dr Ruto’s government says it will focus more on agriculture, micro, small and medium-sized enterprises, housing and settlement, healthcare and digital superhighway and the creative industry.
Allocation to agriculture, rural and urban development is projected to drop from Sh68.95 billion to Sh67.67 billion.
That of health is projected to increase from Sh122.52 billion to Sh148.29 billion as the government hopes to scale up the universal health coverage programme.
The education budget will jump from Sh544.52 billion to Sh580.57 billion at a time the implementation of the competency-based curriculum continues.
That of security will hit Sh220.75 billion from Sh177.81 billion.
Treasury estimates that the economy grew by 5.5 percent last year and projects the pace to accelerate to 6.1 percent this year and maintain that momentum over the medium-term
“This growth will be supported by a broad-based private sector growth, including recoveries in agriculture while the public sector consolidates,” says Treasury.
In terms of allocation to the arms of government, the executive will receive Sh2.132 trillion, Sh115 billion more than what is expected to be spent in the current year.
Allocation to Parliament will increase by Sh1.4 billion to Sh39.88 billion while Judiciary will receive Sh1.19 billion more to take its allocation to Sh20.07 billion.
Consolidated fund services, from which debt payment is made, will rise to Sh908.8 billion from Sh864.1 billion.
Counties will be added Sh5 billion more to take their allocation to Sh375 billion.