The government is set to save an estimated Sh130.2 billion from the planned cuts to recurrent spending by Ministries, Departments, and Agencies (MDAs).
On Tuesday, the Cabinet approved streamlining spending as part of measures to anchor planned fiscal consolidation.
“Cabinet considered the progress being made in the implementation of the financial year 2023/24 budget. Arising therefrom, and as part of the administration’s fiscal consolidation plan that seeks to contain fiscal deficit, the Cabinet sanctioned the reduction of the recurrent budget of each Ministry and State Department by 10 percent. The proposed budgetary cuts will be effected as part of Supplementary Appropriations No.1 of the financial year 2023/24 budget cycle,” said the Cabinet in a memo.
If implemented as planned, the cuts will bring down total recurrent spending by MDAs from Sh1.302 trillion. Units with the heaviest recurrent allocations will see the biggest cuts in day-to-day spending including the Teachers Service Commission, the Ministry of Defence, the State Department for Basic Education, the National Police Service, and the State Department for Higher Education and Research.
The proposed cuts to recurrent spending are a move away from the expected rise in recurrent spending where total recurrent expenditure was expected to jump from Sh2.536 trillion to Sh2.682 trillion as illustrated in the draft 2023 budget and outlook paper.
The paper which serves as a prelude to the first 2023/24 supplementary budget which is expected later this month, showed overall government spending would increase by Sh160 billion to Sh3.908 trillion from the approved budget of Sh3.746 trillion.
Development spending was meanwhile signalled to edge upwards to Sh793.8 billion from Sh777.8 billion previously.
The Treasury further indicated plans to increase borrowing to cover a wider fiscal deficit with total financing being estimated at Sh864 billion from Sh718.9 billion previously.
Net external financing would rise to Sh448.7 billion from Sh131.5 billion while net domestic borrowing would plunge to Sh415.3 billion from Sh587.4 billion with the government desiring to cut its leverage on the domestic credit market amid rising interest rates.
The new proposal to set down recurrent expenditure likely signals a cool down from further borrowing, resetting the exchequer back to a faster fiscal consolidation run.
President Ruto’s administration has committed to fiscal consolidation via a combination of expenditure rationalisation and improved domestic revenue mobilisation.
The National Treasury has estimated to cut the fiscal deficit to 5.4 percent of GDP by June next year from 5.6 percent previously.
“Government will continue to pursue its growth-friendly fiscal consolidation plan that will signal debt sustainability and manageable fiscal gap. The plan will see a gradual decline in the fiscal deficit from 5.4 percent of GDP in the financial year 2023/24 to 4.4 percent of GDP in the financial year 2024/25 and further to 3.6 percent of GDP in the financial year 2026/27,” the National Treasury stated in the draft budget review and outlook paper.
