Increasing taxes is the only viable option the government has been left with as it grapples with financing increased expenditure, Treasury CS Njuguna Ndung’u has said.
While presenting the 2024-25 budget estimates in the National Assembly, Ndung’u said the government finds itself between a rock and a hard place as it seeks to provide services to Kenyans capped at Sh3.92 trillion amid strained revenue sources.
“We have one major problem that has three phases. There is increased demand for increased spending or expenditures from the government which means that either we have to finance that through taxes or debt,” he said.
The CS said borrowing is out of question since there is a ceiling to how much the government can borrow at any given time, more so given the prevailing economic status in the country.
He said the situation is worsened even as increasing taxes remains the only option because there are limitations too to how much the government can increase taxes.
“There is limitation and even constraints imposed in terms of public debt accumulation and even the debt-carrying capacity of the economy. There are limitations in terms of mobilising higher tax revenues,” Ndung’u said.
This year’s budget is the highest ever in the country’s history and the second since President William Ruto came to power.
The National Treasury has proposed a myriad of ways of achieving its revenue targets to finance the Sh3.92 trillion budget including introducing new taxes in the Finance Bill, 2024.
Out of the total budget, the government wants to use Sh1.58 trillion for recurrent expenditure, Sh727.9 billion development expenditure, Sh1.21 trillion for consolidated fund services and Sh400 billion as equitable share for counties.
The government targets to collect Sh2.91 trillion from ordinary revenue, a bulk of which is expected through the proposals in the Finance Bill, 2024, and another Sh441 billion from ministerial appropriation in aid.
The National Treasury has estimated a deficit of Sh508.9 billion of which it seeks to acquire Sh257.9 billion from borrowing from domestic lenders.
The remaining amount of Sh256.7 billion will be sourced from international lenders.
