Budget to increase by Sh80b in final committee report

National Treasury Cabinet Secretary Prof Njuguna Ndung'u. [File Standard]

Government's spending for the next financial year will increase by some Sh80 billion if the recommendations by Parliament's key committee are taken up.

This will push the Budget for the 2023-2024 financial year to Sh3.67 trillion from the Sh3.59 trillion that the National Treasury had earlier estimated would be the total spending for the year.

The National Assembly's Budget and Appropriations Committee (BAC) said the increases followed reallocations, increasing funds allocated to priority areas with high impact on the economy while prioritising the completion of key projects.

However, the committee, which tabled its report on the Budget in Parliament on Tuesday, queried the government's ambitious plans.

In particular is Treasury's projected growth in tax revenues, which if not met, the government would have to go back to the drawing board, with the possibility of having to resort to either borrowing more or undertaking major cost cutting in its spending plans, it said.

"The committee resolves ... that the net increase in the 2023-24 budget estimates of Sh80.7 billion be effected in the votes and programmes," said the BAC in its report to Parliament on the budget for financial year that begins July 1.

The increases will see the national government's (which includes the Executive, Judiciary and Parliament) recurrent expenditure increase by Sh56.49 billion to Sh1.57 trillion.

The development budget, which are funds that will be spent on building infrastructure and other development activities, will go up by Sh24.21 billion.

The impact is an increase in the national government's total expenditure to Sh2.31 trillion from the earlier estimates of Sh2.23 trillion.

This is in addition to Sh385 billion equitable share to counties and another Sh991 billion for the Consolidated Fund Service (CFS), that will push the total budget upwards of Sh3.6 trillion.

"Expenditure within the sectors has been prioritised and reoriented to key envisaged interventions.

"This has been achieved through reduction in non-priority expenditure, rationalisation of expenditure to high priority areas and focus on completion of projects that are at finalisation stages," said the BAC report.

The increase in the size of the budget is despite the committee saying it had shot down many requests from various ministries for more allocations for the 2023-24 financial year.

While collecting views from stakeholders during the budget-making process, BAC said different government agencies had requested for an additional Sh88.9 billion but these could not be accommodated in the budget due to financial constraints.

The requests had come through parliamentary committees that had held earlier meetings with the ministries, departments and agencies.

"The Budget and Appropriations Committee received substantial additional requests from the departmental committees amounting to Sh88.86 billion to meet various expenditure shortfalls.

"However, due to prevailing resource constraints and the need to contain the fiscal deficit within a certain limit, the committee could not finance most of these requests," said the Committee in the report," said BAC.

Treasury expects Kenya Revenue Authority to collect Sh2.57 trillion in tax revenues, 17 per cent higher than this year's target of Sh2.1 trillion.

This, the committee noted, was highly ambitious, considering growth in tax revenues has in the past averaged at 10 per cent every year.

It also noted that Treasury has recently cut economic growth projection for the year to 5.6 per cent from an earlier projection of 6.1 per cent, which could also mean tax revenues might be affected.

"The ordinary revenue projection for the 2023-24 financial year is Sh2.57 trillion, which represents a 17 per cent increase relative to the expected 2022-23 financial year collection," the committee said.

"The committee notes with concern that this revenue target is quite ambitious, taking into account historically, ordinary revenue has grown at an average of around 10 per cent.

"Further, the downward revision of GDP growth projection is indicative of a concomitant reduction in revenue collection."

The committee also expressed reservations in the budget deficit of 4.1 per cent as a ratio of gross domestic product (GDP), noting that this was tied to the ambitious revenue collection target.

Over the 2023-24 financial year, the government plans to borrow Sh663 billion compared to Sh824 billion (5.7 per cent of GDP). It expects higher revenues to bridge the gap that it would have otherwise had to fill through borrowing.

"The fiscal deficit including grants as a share of GDP is expected to decline from 5.7 per cent (Sh824 billion) in 2022-23 financial year to 4.1 per cent in 2023-24," BAC said.

"The committee notes, however, that this projected reduction in the deficit is partially attributed to an ambitious projection in tax revenue collection.

"Should the revenue collection target not materialise, it will necessitate a downward revision in expenditure through a supplementary budget."