According to the Draft Budget Policy Statement (BPS), revenue is expected to increase by only Sh49.3 billion to hit Sh2.13 trillion as total spending is cut by Sh130.4 billion to Sh2.74 trillion.
The 4.5 percent expenditure cut is nearly double that of the revenue increase implying that the Treasury has factored a larger extent of the reduction in expenditure in the coming fiscal year.
The National Treasury has factored a marginal 2.4 percent increase in total revenues for the next fiscal year in line with intentions to lower expenditure and pursue austerity.
According to the Draft Budget Policy Statement (BPS), revenue is expected to increase by only Sh49.3 billion to hit Sh2.13 trillion as total spending is cut by Sh130.4 billion to Sh2.74 trillion.
The 4.5 percent expenditure cut is nearly double that of the revenue increase implying that the Treasury has factored a larger extent of the reduction in expenditure in the coming fiscal year.
The draft BPS, which sets the priorities ahead of the completion of the actual Budget Estimates for various State entities, shows that ordinary or tax revenue is projected at Sh1.86 trillion, only 0.7 percent higher than the amount expected to be raised by the end of June this year.
“In the FY2020/21 revenue collection including Appropriation-in-Aid (A.i. A) is projected to increase to Sh2,133.5 billion up from Sh2,084.2 billion in the FY 2019/20. … the overall nominal expenditure and net lending for FY2020/21 is projected at Sh2,743.8 billion from the estimated Sh2,874.2 billion in the FY 2019/20 budget,” said the Treasury,” says the Treasury.
The expenditures comprise recurrent at Sh1,786.9 billion and Sh576.0 billion for development.
The projections leave a deficit of Sh569.4 billion which is lower compared to Sh657.4 billion the Treasury expected by end of this fiscal year ending June 30. That means the deficit will be lower in the coming fiscal year compared to the current one.
“Reflecting the projected expenditures and revenues, the fiscal deficit (including grants), is projected at Sh569.4 billion (4.9 percent of GDP) in FY 2020/21 against the estimated overall fiscal balance of Sh657.4 billion (6.3 percent of GDP) in FY 2019/20,” said the Treasury.
The deficit in FY2020/21 will be financed by net external financing of Sh247.3 billion and Sh318.9 billion net domestic borrowing and other net domestic receipts of Sh3.2 billion.
A major reason for the austerity is to lower the current debt levels.
“Going forward into the medium term, the government will continue in its fiscal consolidation path … This will ensure debt is maintained within sustainable levels,” said the Treasury.
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