State budget for development drops by Sh65b

State spending on development projects will drop by Sh65 billion in the next financial year in fresh austerity measures.

National Treasury Cabinet Secretary Henry Rotich has presented proposals which impact on budgets of several ministries, departments and commissions.

The new measures, which are also expected to cut wastage, come as a surprise considering governments tend to spend more in election years, like 2017 for Kenya.

National Treasury CS Henry Rotich arrives for the Intergovernmental Budget and Economic Council (IBEC) meeting at Deputy President's Residence in Karen, Nairobi, on 9th February, 2016. (PHOTO: FILE/ STANDARD)

"The resolutions of the Fifth National and County Government Co-ordinating Summit held in Sagana, among others, adopted a policy of austerity aimed at eliminating wastage," Rotich said of the revised Budget Policy Statement released on Tuesday.

Spending for tourism promotion in the next financial year, which is only a quarter of the Sh8.5 billion allocated this year, stands out as the single biggest budget cut.

The proposals have been revised days after President Uhuru Kenyatta hosted governors at Sagana State Lodge in a meeting whose main agenda was austerity.

The counties resolved to halve their travel budgets, just like the national government.

Rotich has also proposed to raise income taxes, a review that would take away more money from those already paying while netting more citizens who earn a wage but are not taxed.

"A review of the Income Tax Act will commence shortly," Rotich said in the proposals that could infuriate workers who already feel overburdened.

The revised income taxation schedule is expected to be brought to the National Assembly in June as part of the Finance Bill.

Economic analysts who spoke to The Standard on the budget outlook had predicted that the State would consider borrowing more to keep the Government running rather than to raise taxes and cut spending.

At least nine ministries and departments will have a sharp drop in their respective budgets, among them Lands, Energy, Transport and Livestock.

Rotich plans to cut his ministry's budget by Sh1.5 billion, while projected spending on the railway construction will be down by Sh37 billion. It is projected that the Standard Gauge Railway project will be in the final stretch in the first half of 2017.

Allocation to the Lands ministry is down by nearly Sh5 billion while the Department of Planning has its budget cut by over Sh8 billion to the proposed Sh73 billion.

A drop in development budgets for projects like roads and dams means fewer business opportunities for firms in the private sector since the State is their biggest buyer of goods and services.

In the current financial year, the State has already slashed its spending projections by Sh80 billion after the total budget was revised downward to Sh1.89 trillion.

Several projects, which have not been commenced, have already been shelved. The reasons given for the cuts include poor absorption of resources at the national and county governments.

But there are a few winners who will be allocated more resources in the coming year, despite the broader budgetary cuts. Ministry of Defence will be allocated Sh4 billion more while the National Intelligence Service has been granted Sh23.8 billion, up from Sh20 billion.