- National Treasury and Planning Cabinet Secretary Ukur Yatani said the State had slashed both its development and recurrent expenditure targets amid a tough economy.
- The budget realignments come at a time of reduced revenue collection, exposing the country to another financial year of ballooning debt.
Kenya Power #ticker:KPLC, public universities, and roads projects are among the hardest hit as the Treasury chopped off Sh8.9 billion from its 2021/2022 budget which is set to be unveiled next Thursday.
National Treasury and Planning Cabinet Secretary Ukur Yatani said the State had slashed both its development and recurrent expenditure targets amid a tough economy.
“The overall change in the financial year 2021/2022 budget estimates will be a reduction of Sh8.9 billion on account of Government of Kenya (GoK) funded expenditure and Sh6.1 billion on account of externally financed projects,” he told Parliament.
The Treasury had in March proposed overall spending for the year 2021/22 of Sh2.97 trillion, up from Sh2.88 in 2020/21.
The cuts come at a time tax collections have fallen behind targets in the wake of coronavirus-induced economic fallout, including layoffs, salary cuts, and reduced business revenues.
Treasury data shows that the taxman collected Sh1.19 trillion in the 10 months to April, representing a four percent fall from Sh1.24 trillion collected in a similar period last year.
A review of the revised budget showed that allocations to Kenya Power has been trimmed by Sh1.5 billion, dealing a blow to the utility firm’s transmission improvement project that targeted curbing the billions of shillings in losses due to leaks on its ageing lines.
Public universities, which are currently facing serious liquidity challenges, will have to put up with a Sh5.3 billion cut in recurrent spending that mainly caters to salaries and allowances.
The Treasury has also cut its spending on wages, salaries allowances, and other administrative activities by Sh3.7 billion — signaling austerity for civil servants.
Affordable housing programme allocation has been cut by Sh2.5 billion while those towards a recently created Credit Guarantee Scheme that targets small businesses has been reduced by Sh1 billion.
The behind-schedule Konza Technology City project has lost Sh1.6 billion, putting further brakes on the project that was once touted as Kenya’s Silicon Savannah during the Mwai Kibaki era.
A project to dual the Thika-Kenol-Marua road has suffered a Sh700 million funding cut at a time government is targeting to complete it by June next year.
Other road projects that were to be financed by the Exchequer will also have to do without Sh1.4 billion in their purse.
Part of the money released from the cuts has been redirected to other projects with Kazi Mtaani that targets casual jobs for youth getting Sh3 billion.
“The Sh3 billion is for settling pending payments,” Housing Principal Secretary Charles Hinga told the Business Daily on Thursday.
The Treasury has added Sh3 billion for the construction of a disease-free holding zone for livestock in Lamu while a similar amount has been increased to cater for the construction of a road along the Lamu Port-South Sudan-Ethiopia-Transport corridor.
Rehabilitation of the Riruta-Lenana-Ngong railway has been allocated an additional Sh2 billion. The line is part of the ongoing expansion and upgrading of the old railway line that links Nairobi City with neighbouring towns.
Construction of the Liwatoni floating bridge in Lamu County has got an additional Sh1 billion as the State eyes completing it before President Uhuru Kenyatta exits office.
Lamu County will also benefit from an additional Sh1 billion allocated for the construction of a fish processing plant as the State seeks to upgrade the fortunes of the fishing sector on the Coast.
The budget realignments come at a time of reduced revenue collection, exposing the country to another financial year of ballooning debt.
Parliament will not allow the Treasury to borrow more than 7.5 percent of the country’s economic output (GDP) to plug the budget shortfall in the financial year starting July 1.
The National Assembly has capped the Treasury borrowing to Sh930 billion in the financial year 2021/22.
The House resolved that the Treasury can only borrow loans of up to Sh530 billion from domestic lenders and Sh399.9 billion from foreign sources to finance the budget in the coming financial year.
But the drop in revenue means the Kenya Revenue Authority (KRA) will be under increased pressure to meet collection targets in an environment that is reeling from Covid-19 difficulties.