President William Ruto has asked the 22 ministries in his government to find some Sh300 billion in their kitty, which will be slashed in efforts to manage Kenya’s overdependence on debt.
Dr Ruto made the pronouncement on Thursday, September 29 during his inaugural address to the joint parliamentary sitting of the Senate and the National Assembly.
His order means that some Sh300 billion that had been factored in the current budget (2022-2023) will be done away with, thus reviewing downwards the annual budget from Sh3.31 trillion to Sh3.01 trillion.
Ruto suggested that the reduction would help manage Kenya’s debt burden and improve the national savings.
As of September 2022, the country’s debt burden stood at just over Sh8.5 trillion.
According to Ruto, Kenya collects Sh2.3 trillion annually which goes towards paying public servants’ salaries and servicing debts.
Dr Ruto states that the resultant effect on the country is a deficit in development budget that is addressed by borrowing from local and foreign lenders.
He said in the current financial budget, Kenya is in deficit of Sh900 billion, which is bridged by borrowing.
“Over the last decade, we have sought to close this gap (budget deficit) with public borrowing. This year alone, we budgeted to borrow Sh900 billion to finance both development and recurrent expenditure. The government should never borrow to finance recurrent expenditure. This is not right, prudent or sustainable, it is simply wrong. We must bring ourselves back to sanity,” he said.
As a result, the Head of State announced a three-year timeline in which he plans to contain the appetite for domestic and foreign borrowing.
“Over the next three years, we must reverse this and go back to the situation where government contributes to the national savings effort by keeping recurrent expenditure below revenue,” said Dr Ruto.
“To this end, I have instructed the National Treasury to work with ministries to find savings of Sh300 billion in this year's budget. Next year, we will bring it further down so that, by the third year, we have a recurrent budget surplus.”
The president also pledged to oversee a tax-friendly regime that places Kenyans’ welfare at the centre of its operations.
“This (Kenya’s taxing system) must be equitable, efficient and customer-friendly. The economic principles of equitable taxation require that the tax burden reflects ability to pay. This is best achieved by a hierarchy that taxes wealth, consumption, income and trade in that order of preference. Our tax regime currently falls far short of this.
“We are over-taxing trade and under-taxing wealth. We will be proposing tax measures that begin to move us in the right direction,” he said, adding: “We will also work with the Kenya Revenue Authority (KRA) on a culture change to make it a people-friendly, customer-centric organisation. I am of the view that we should rename it the Kenya Revenue Service in line with the proposed transformation.”