You should brace yourself for tougher times ahead as the Government prepares to increase taxes and cut its expenditure.
National Treasury Cabinet Secretary Henry Rotich yesterday said he was targeting a fiscal deficit of 5.7 per cent of the gross domestic product for the current financial year.
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A fiscal deficit occurs when a government’s total expenditure exceeds the revenue it generates, and normally excludes money from borrowing.
This means the Government will slap you with more taxes even as it reduces its spending which, in extreme cases, might result in some civil servants being laid off.
The 5.7 per cent fiscal deficit is a reduction from the six per cent that Treasury had projected in its 2018 Budget Policy Statement published in February.
Mr Rotich also noted that as a result of a number of austerity measures undertaken so far, the country was still within the 7.2 per cent fiscal deficit target for the financial year that ended on June 30.
“We are on course on that. Already, the budget out-turn preliminary indication is that we are on target of that 7.2 per cent. And this financial year, we are looking at 5.7 per cent,” said the CS after giving a keynote address during this year’s Evidence to Action Conference in Nairobi. In the recent past, the Government has been burning the candle at both ends by coming up with measures to increase revenue collection even as it reduces runaway expenditure and at the same time borrowing heavily.
One of these measures has been a decree by President Uhuru Kenyatta to freeze new projects, except those related to his Big Four agenda, until the ongoing ones are completed.
“There will be no new projects embarked on until you complete those that are ongoing,” Mr Kenyatta notified principal secretaries and heads and board chairpersons of parastatals.
Rotich said the President’s directive was aimed at injecting prudence in expenditure.
“What we are saying here is that we are just going to be prudent in terms of domestically financed projects. What we are saying is that let us focus on what we had started last year and complete them before ministries and entities jump into the procurement of new projects,” he said.
Rotich refuted claims that there was a link between the President’s directive and the presence of the International Monetary Fund (IMF) team in the country. “There is no link between IMF team being in the country and what the President said,” he said.
The CS has also proposed new tax measures, including increased excise duty on mobile money transactions, kerosene and bank transactions of Sh500,000 and above to shore up tax revenues.
On the delayed IMF report, the CS said it would be published soon.
IMF’s Nairobi representative, Jan Mikkelsen, told The Standard on the phone that while the fund’s executive board had everything in place, it was still waiting for the Kenyan authorities’ approval.
He said the IMF team that is in the country until the end of next week would issue a statement at the end of their visit.