Kenya to miss growth target on budget gaps and revenue leaks

Kenya risks missing its growth targets due to gaps in the Sh4.1 trillion budget for the upcoming 2024/2025 financial year, experts have warned.

The Institute of Public Finance (IPF), a finance think tank, has warned that the absence of allocation for pending bills, low development budget, mismatched priorities and overlaps in government functions could deny the economy the much-needed recovery push, with billions of shillings going to waste due to leakages.

Questioning the practicability of the growth target, IPF Chief Executive James Muraguri on Wednesday urged the government to make the right investments in the coming budget and prioritise, among other sectors, education, health and Agriculture to achieve its 5.5 per cent economic growth target for the coming financial year that starts in July.

He said the current discrepancies in budget allocations, low budget absorption rates, pending bills and duplication of functions have hampered efforts by the government to achieve its fiscal consolidation strategies.

While releasing this year’s National Shadow Budget themed Budgeting in an Era of Fiscal Consolidation: Protecting Key Priorities, Mr Muraguri said that the National Government’s forecast of a Sh300 billion increase in ordinary revenue for the fiscal year 2023/2024 remains hazy. This is given the uncertainty regarding the rising cost of borrowing and the accumulation of debt, which continues to shrink the borrowing space.

The think tank further noted the disparity in the budget is further compounded by external risks as well as high unemployment concerns across the country.

Despite the government’s commitment to supporting Small and Medium Enterprises (SMEs), it said, transforming the agriculture sector and resolving the funding crisis in education, the changes in resource allocation suggest otherwise. Of the projected Sh4.1 trillion total spending, Sh2.5 trillion has been allocated to the national government, with county governments getting Sh391 billion.

The education sector has been allocated Sh666.5 billion, which is the largest projected allocation, followed by energy, infrastructure and ICT. Early this year, the National Democratic Institute said the government’s plan is very scanty. Economists and business leaders have also faulted the budget policy statement, saying it is unrealistic and outrageous.

The provision for agricultural transformation was also said to be insufficient.

“Limited borrowing space to finance the budget and the drawing of huge resources by a high debt servicing burden has forced the government to resort to budget cuts for the General Economic Commercial Affairs (GECA) sector by 22 per cent, the Agriculture, Rural, and Urban Development (ARUD) sector by 10 per cent, and the education sector by three per cent,” said Mr Muraguri.

The financial think tank also said there is a pressing need to prioritise the clearance of nearly Sh570 billion in pending bills nationally and Sh165 billion owed by counties.