Treasury eyes Sh91.6bn savings through radical budget cuts

The National Treasury has proposed radical austerity measures aimed at re appropriating an estimated Sh91.6 billion by cutting back on government spending.

The move has been necessitated by an acute revenue shortfall and stalled economic activity that has seen the government’s income lines stall.

In a memo to cabinet, Treasury Cabinet Secretary Henry Rotich said income tax dropped by Sh23 billion while appropriation in aid funds underperformed by Sh6.7 billion.

Of concern to the treasury chief is the projected economic underperformance that is likely to continue piling pressure on budget execution.

Renegotiation of CBAs, effects of the drought and heightened political activity have also presented further budget implementation challenges, leading to rationalization of planned expenditure.

“Given that the economy has not generated new resources to finance the emerging needs, we are proposing to reorganize the planned expenditures for the FY2017/18 in line with article 233 of the constitution and section 44 of the public finance management act,” Mr Rotich said in his memo to cabinet.

Ministries will also have to make do with scarce resources under the austerity plan with treasury rationalizing expenditure.

Ministries and government departments had made requests for additional funding to the tune of Sh183.5 billion which has been cut to Sh110 billion.

Foreign travel, communication and advertising, training, hospitality services as well as purchase of new vehicles have seen their budgets slashed by 75 percent for the remainder of the 2017/18 financial year.

“This means there will be no budgetary provisions for the listed items rationalized by 75 percent, for the remainder of the financial year,” Mr Rotich said.

This is expected to save the government Sh24.3 billion in recurrent expenditure.

The cut backs are also set to affect development spending going forward.

In the proposal, the Treasury has at the same time slashed the budgets for domestically financed development projects by 75 percent, with an anticipated savings of Sh67.3 billion.

Last week Central Bank of Kenya Governor Dr Patrick Njoroge held that there was unlikely to be a major dip in economic growth, but warned that a slowdown in government spending could affect performance.

“If there is more noise more noise (due to the elections) or delays there will be a delayed execution of government development projects and this also has significant effects on payments to contractors. All these have ripple effects to not just the business community but consumers as well,” Mr Njoroge said last week during a media briefing.