Budget cuts loom as revenue falls short of target by Sh53 billion

Treasury secretary Henry Rotich. FILE PHOTO | NMG
Treasury secretary Henry Rotich. FILE PHOTO | NMG 

Government revenue collection for the first five months of the year to June is behind target by Sh52.6 billion, setting the stage for further budget cuts.

Treasury secretary Henry Rotich on Monday quoted collections of Sh558.4 billion in the five months against a target of Sh611 billion, reflecting the slowdown in economic activities that saw growth for 2017 forecast at 4.8 per cent, the  slowest growth since 2012.

Taxes underperformed the target by Sh29.7 billion while fees generated by ministries are Sh22.9 billion short of the expected collections.

This has prompted the Treasury to cut projected revenue for the year ending June by Sh61.4 billion to Sh1.643 trillion, while total spend and net lending has been increased by Sh35.3 billion to Sh2.323 trillion.

The revision has “taken into account expenditure rationalisation necessitated by the accommodation of the emerging priorities and salary and election related expenditure pressures,” Mr Rotich said.

“In the first five months of the (2017-18) year, revenues collection have consistently lagged behind targets due to the under performance of the main revenue tax heads,” he said.

“On the other hand, there has been elevated expenditures pressures as a result of the adverse spillover effects of the prolonged drought, the repeat of the presidential election and salary awards for universities staff and nurses.”

Government spent nearly Sh7 billion on a maize import subsidy following drought the cut supplies, Sh12 billion on the repeat presidential poll, and another Sh12.7 billion on nurses and lecturers pay.

The additional expenses amid reduced tax collections will lead to further budget cuts, especially on non-essential items like travel.

Recurrent expenditure overshot target by Sh15.4 billion to Sh494.8 billion while interest payments on debt was Sh12 billion above budget.

Lower tax collection is the product of reduced economic activity due to drought and political uncertainty linked to the General election.