Repeat presidential election to derail Treasury spending cut plan, warns report

Raila Odinga casts his vote during the August 8 polls at Kibera primary school (Photo: Courtesy)

The Government will not be able to cut spending as earlier projected by the National Treasury in the budget after all.

According to a new report by Bloomberg Intelligence, next month’s repeat presidential election is bound to put the fiscal consolidation needed to stabilise the country’s public debt at risk.

Bloomberg Intelligence Africa and Middle East Economist Mark Bohlund said the Sh12 billion bill for a repeat poll (about 0.1 per cent of GDP) and the prolonged political uncertainty puts paid to plans to reduce spending in line with projections in the budget.

“This addition to recurrent expenditure in 2017/18 (July-June) should be manageable. The more substantial impact is likely to be the delay or outright cancellation of planned fiscal consolidation measures,” said Mr Bohlund.

Budget shortfall

Finance Cabinet Secretary Henry Rotich said the polls may cost upwards of Sh15 billion, including security expenses, which further puts the fiscal consolidation agenda in doubt.

Economists have warned the country needs to reduce the gap between revenue collection and spending, known as the fiscal deficit, in order to manage public debt.

The country’s budget shortfall has always been a thorn in the flesh, with Treasury anticipating a Sh582.5 billion hole in this financial year’s Sh2.29 trillion budget.

Last year, Treasury projected that the shortfall would be 8.9 per cent, but additional spending later pushed the estimated deficit to 10.2 per cent of GDP.

This year’s budget outlined a reduction in the fiscal deficit to seven per cent.

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