•According to the International Budget Partnership (IBP Kenya), now Bajeti Hub, fiscal discipline has been a big challenge in Kenya, and which can lead to wastage.
•Secondly, oversight especially by Parliament has been a significant gap and that does lead to wastage.
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President William Ruto's administration must completely tame wastage if it is to meet its 2024-25 budgetary plans, experts now say.
This comes as Treasury walks a tight rope on balancing recurrent and development expenditure for the current financial year ending June 30, 2025, amid huge budget cuts that have been occasioned by the collapse of the Finance Bill 2024, that could see a freeze on development.
The government is also facing a challenge with the country’s high debt stock, expected to further rise on planned borrowing to bridge the budget deficit, even after Treasury proposed reduce the 2024-25 budget to Sh3.87 trillion from Sh3.99 trillion, in its Supplementary Budget before Parliament.
The 2024-25 budget was to be funded through additional revenue measures amounting to Sh344.3 billion contained in the Finance Bill 2024, which President Ruto declined to assent to, following protests by the public.
Under the new estimates, Treasury has proposed to cut national government ministerial expenditure by at least Sh156.4 billion to Sh2.2 trillion, with development estimates expected to go down to Sh623.9 billion from Sh746.3 billion.
The budget cuts, which are expected to hard-hit development, mergers of state agencies with duplicating roles, and reduced allocation to counties are some of the measures in President Ruto’s plan to “live within means.”
However, financial experts now say Kenyans will still lose out on development with the government struggling with meet its expenditure despite continued borrowing, if fiscal discipline is not observed.
“Fiscal discipline has been a big challenge in Kenya, and which can lead to wastage. Secondly, oversight especially by Parliament has been a significant gap and that does lead to the first problem as well,” said John Kinuthia, senior programs officer at the International Budget Partnership (IBP Kenya), now Bajeti Hub.
According to the institution, the government will still be expected to deliver some development projects despite the cuts, hence the need to ensure strengthening of Public Finance Management (PFM) systems, in order to enhance budget effectiveness.
“There will still be a development budget and we expect the government to also borrow slightly higher than the initial target and that will go towards development funding as required by the PFM Act,” Kinuthia explained.
While Kenya has previously borrowed to bridge budget deficits, including funding development, there have been concerns of wastage and corruption within government institutions, which has seen the public fail to reap the benefits.
"The budget deficit remains elevated, particularly due to heavy debt service obligations and bloated budgets for MDAs (Ministries, Departments and Agencies)," data analyst, Mihr Thakar, told the Star.
Among demands in the ongoing anti-government protests is for President Ruto to deal with corruption within his government, and get right leadership in his Cabinet, after last week’s dissolution.
“It is a bold decision, a big one but we have to wait and see how the new cabinet will try to undo some of the economic challenges faced by the country today,” said Peter Macharia –CEO of digital lending firm, Jijenge Credit limited.
Indeed, economists keenly following the new developments are optimistic Ruto’s promise to form a new unity government can deliver stable economic policies to revive growth, but are cautious about how the awaited new Cabinet can reconcile stark ideological differences.
The government however has an opportunity to delay the implementation of some development projects that can be staggered to coming years, according to IBP Kenya.
“This is possible for development projects funded domestically and in non-essential services. Donor projects may however be difficult to move if their funding is earmarked,” said Kinuthia.
Meanwhile, poor public finance management and low development has also remained a major concern at counties, amid delayed disbursements, which end up delaying execution of budgets especially development projects.
Some contractors who are awarded contracts also lack the required capacity to deliver projects, which affects the quality and timelines.
“There are other challenges, that include late approval of policies, missed revenue targets on own source revenue but also very centralised procurement systems that can lead to clogs in the processing of procurement,” IBP noted.
Majority of allocations to counties however go towards recurrent expenditure, mainly paying salaries.
This, as Senators continue to question the “massive wastage” in the government and loopholes, which they insist, should first be sealed before starving crucial dockets.
Last week, Nairobi Senator Edwin Sifuna said wastage and extravagance in government institutions can be moped up and rechanneled.
“We need to relook at our budgets and see where we can make major cuts for the public to feel we're lessening the budget,” Sifuna said.
National Treasury has submitted the Supplementary Estimates for the Financial Year 2024-25 (recurrent and development), together with the Programme Based Budget and the Memorandum on the estimates for consideration by Parliament.
It seeks to rationalize the 2024-25 budget estimates to align to the revised fiscal framework and actualize expenditure cuts across the three arms of the government, constitutional commissions and independent offices.
“The Budget and Appropriation Committee is required to guide the process, seek public views and report to the House on or before July 24, to enable the House to subsequently consider the Supplementary Estimates,” Speaker Wetangula said in a standing order.
Despite the budget cuts, Treasury is tasked to ensure fiscal risks are managed prudently.
To support businesses, the Budget and Appropriation Committee has proposed that verified pending bills are progressively prioritised for payment within the approved fiscal framework and report to the National Assembly quarterly.The fiscal consolidation efforts should also not target social safety net programmes, according to Committee.
To manage fiscal risks prudently as required, Treasury PS Chris Kiptoo said the government will continue reviewing its macroeconomic forecasts ad the impact of the projections and their implications on the budget.
“Potential fiscal risks arising from contingent liabilities, including those from Public Private Partnership projects among others, have been taken into account and a contingency provision made to cushion the economy from unforeseen shocks,” Kiptoo said.
He said the government will also continue to carry out tax reforms through modernising and simplifying tax laws, as well as tax reforms to improve the tax revenue base.