Treasury budget projection recipe for failure

National Treasury Building. [Jonah Onyango, Standard]

The draft budget policy document is available on the Treasury’s website. The document outlines the government’s projected expenditures over the next few years. And since budget is policy, the document’s contents reveal the government’s intentions as far as steering the economy and creating incentives for private sector investment are concerned. A few things stand out and are therefore worth consideration here.

The Treasury’s budget policy statement betrays what most reasonable people would consider to be unwarranted optimism. Consider the deficit – the difference between the government’s net revenues and expenditures. The document projects a reduction in deficits from almost 8 per cent of total output (GDP) in the fiscal year 2018/19 to around 3 per cent by 2023/24. Is that possible? Not likely. We are about to enter a heated campaign season – for a possible referendum and then the General Election in 2022. Both will necessarily require significant outlays to please voters. It is highly unlikely that the Jubilee administration will be disciplined enough to tighten its belt under such circumstances. We are already seeing this with the return to roadside pronouncements from the president committing Treasury to spend billions of shillings on his pet projects. This will only get worse as the president battles to secure a favorable successor and salvage his legacy. Expect significant levels of wasteful spending in the name of the Big 4 Agenda. All to say that it is highly improbable that fiscal policy will match Treasury’s rosy projections.