The Treasury wants Parliament to review the Division of Revenue Act, 2017 to cut the current budget for national and county governments following revenue shortfall of Sh84 billion.
Treasury secretary Henry Rotich says the annual allocation to county governments will be reduced by Sh18 billion while that of the national government will be cut by Sh60 billion.
Lower tax collection is the product of reduced economic activity due to drought and political uncertainty linked to last year’s General Election.
The slowdown in economic activities saw growth for 2017 forecast at 4.8 per cent, the slowest pace since 2012, but the Treasury expects a rebound of 5.8 per cent this year.
“We projected to collect Sh1.56 trillion in the Division of Revenue Bill in March last year but following the discussions we have had with the International Monetary Fund, we project the revenue to fall to Sh1.477 billion bringing a shortfall of Sh84 billion,” said Mr Kamau Thugge, Treasury principal secretary.
The Treasury said attempts to bridge revenue shortfalls through domestic borrowing were unsuccessful due to uncertainty of electioneering arising from nullification of presidential election results in August 2017.
“We are lagging behind in revenue and we have instituted deficit consolidation programme. This is because in the last one year, the deficit was huge and there is sensitivity among Kenyans and foreign quarters on the issue of our levels of borrowing. Our public debt is, however, sustainable,” said Mr Rotich.
He said Kenya Revenue Authority has been instructed to institute administrative measures on the customs side and domestic revenue collection and the Treasury is looking at how to recoup lost revenue.
“We are looking at Supplementary II to cut expenditure at both levels of government, which must contribute to lowering of budget deficit so that we can match revenue with expenditure. We have discussed with governors to also institute austerity measures.
“We want every institution to tighten its belt. We have adopted a tighter fiscal framework going forward and pursue revenue enhancement measures going forward,” Mr Rotich told the Senate Finance and Budget committee chaired by Mohammed Mahmud.
Makueni Senator Mutula Kilonzo Jnr opposed the budget cuts saying counties had already made spending plans and committed revenues.