President William Ruto’s administration projects expenditure for the day-to-day running of the government is Sh81.7 billion more than what the previous regime budgeted, pointing to piling spending pressures, including salaries and wages.
The Treasury has forecast recurrent budget for the financial year ending June to top Sh2.35 trillion, a 2.35 percent rise over Sh2.27 trillion estimates by his predecessor’s administration that handed over power last September.
The projected extra budget will largely go to recurrent expenditure labelled “others” as well as salaries and wages.
The recurrent expenses under “others” are expected to increase by Sh69.8 billion to Sh364.5 billion, while the public wage bill for the executive is seen rising Sh23.5 billion to Sh560.7 billion, the projections in the Budget Review and Outlook Paper show.
The forecast rise in expenses for running the government is higher than the 2.35 percent, or Sh50.3 billion, projected growth in ordinary revenue — taxes, levies, rent of buildings, fines and forfeitures— to Sh2.19 trillion.
Treasury Cabinet Secretary Njuguna Ndung’u recently told the International Monetary Fund (IMF) that the Ruto government was facing spending pressures emanating from Sh279.26 billion payments, which were either carried over from the previous financial year ended June or unbudgeted like the Hustler Fund.
“Obligations carried over from last fiscal year and an increase in unbudgeted spending in early FY2022/23 increased pressures on the budget,” the IMF wrote in the latest report on Kenya following a review between October 25 and November 8.
“The new administration of President Ruto has reasserted Kenya’s commitment to fiscal consolidation, targeting a lower overall fiscal deficit [of 5.8 percent] than the original budget [6.2 percent].”
Non-debt payments amounting to Sh88.66 billion were deferred from last financial year, while Sh61.02 billion bills which were incurred earlier this fiscal year — including Sh26.09 billion for fuel, maize flour and fertiliser subsidies ahead of the hotly-contested August presidential poll — were not in the budget.
“Remaining pressures [Sh130 billion] are mainly related to the July and August pause in fuel price adjustments, the July’s temporary introduction of a maize flour subsidy, unavoidable drought emergency interventions, and the launch of new initiatives from our administration, including plans to support agricultural production by subsidising fertiliser,” Prof Ndung’u said in the letter to the IMF he wrote jointly with Central Bank of Kenya Governor Patrick Njoroge.
“Furthermore, we want to promote financial inclusion by establishing a Financial Inclusion Fund (also known as “Hustler Fund”).”
The Treasury will detail the review of the expenditure through a supplementary budget set to be tabled in the National Assembly for debate and approval later this month.
The higher projection in non-debt recurrent expenditures will go against the regime’s strategy to keep a tight lid on the cost of running the government while aggressively growing taxation streams in a bid to reduce the country’s reliance on borrowing to fund programmes.
Dr Ruto has directed the Treasury to work with other ministries to reduce the nearly Sh1.18 trillion recurrent budget for this fiscal year by at least Sh300 billion.
The plan, the President says, will reduce the need to borrow Sh862.5 billion to plug the hole in the Sh3.39 trillion projected budget for this financial year ending June 2023.
The resultant savings will ease the pressure to borrow “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,” Dr Ruto said in his inaugural address to a joint sitting of the National Assembly and Senate end of 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.”
