The anticipated reductions in recurring spending by Ministries, Departments, and Agencies (MDAs) are expected to result in savings to the government of around Sh130.2 billion.
Tuesday, the Cabinet authorized steps to anchor the anticipated fiscal restructuring, including spending reduction.
“Cabinet took into account the developments in the execution of the fiscal year 2023–2024 budget. In response to this, and as part of the administration’s strategy to reduce the deficit through fiscal consolidation, the Cabinet approved a 10% cut to the recurrent spending for each Ministry and State Department. According to a memo from the Cabinet, the planned budgetary cuts will be implemented as part of Supplementary Appropriations No. 1 of the fiscal year 2023–2024 budget cycle.
If executed as intended, the cuts will result in a reduction of Sh1.302 trillion in MDAs’ overall recurrent budget. The Teachers Service Commission, the Ministry of Defense, the State Department for Basic Education, the National Police Service, and the State Department for Higher Education and Research are some of the organizations that will experience the highest reductions in daily spending.
The proposed reductions in recurrent expenditures represent a departure from the projected increase in recurrent spending, which was shown in the draft 2023 budget and outlook report as a climb in total recurrent expenditure from Sh2.536 trillion to Sh2.682 trillion.
The document, which acts as an introduction to the first 2023–24 supplemental budget, is anticipated later this month. It showed that overall government spending would rise by Sh160 billion, to Sh3.908 trillion, from the Sh3.746 trillion approved budget.
Meanwhile, it was announced that development spending would increase slightly to Sh793.8 billion from Sh777.8 billion earlier.
The Treasury also stated that it intended to raise borrowing to pay for a larger fiscal deficit, with total financing anticipated to rise from Sh718.9 billion to Sh864 billion.
Net domestic borrowing would decrease to Sh415.3 billion from Sh587.4 billion as the government sought to reduce its leverage on the local credit market in light of rising interest rates. Net foreign financing would increase to Sh448.7 billion from Sh131.5 billion.
The latest proposal to limit recurrent spending most certainly represents a halt to additional borrowing and returns the exchequer to a higher pace of fiscal restructuring.
The administration of President Ruto is committed to budgetary consolidation through a combination of better domestic revenue mobilization and expenditure rationalization.
The government will keep working on its fiscal consolidation strategy that promotes growth and shows a controllable fiscal imbalance and sustainable debt. According to the plan, the fiscal deficit will gradually decrease from 5.4 percent of GDP in the fiscal year 2023–2024 to 4.4 percent in 2024–2025 and then to 3.6 percent in 2026–2027, according to the National Treasury’s draft budget review and outlook paper.
