Treasury plans to increase budget spending to Sh4.1tr

National Treasury has announced plans by the government to increase spending to Sh4.1 trillion in the financial year 2024/25 from Sh3.7 trillion this year in a bid to stimulate economic growth and address pressing social needs.

The revelation is part of the Budget Review Outlook Paper (BROP), in which the government claimed there will be no new project. “The government will continue to emphasise on the implementation of policy measures such as the zero-based budgeting process and adoption of no new projects policy,” it said.

One notable aspect of the revised budget is a slight downward adjustment in the overall expenditure, which now stands at Sh4.199 trillion, down from the initial projection of Sh4.257 trillion.

This recalibration signals a meticulous effort by the government to balance the need for increased spending with fiscal responsibility.

Revenue projections have experienced an upward revision, now totaling Sh3.455 trillion, as opposed to the previous estimate of Sh3.408 trillion. Of this, ordinary revenue sees a significant boost to Sh2.958 trillion, up from the initial Sh2.919 trillion forecast in the BROP.

The increase in revenue projections underscores the government’s commitment to enhancing its income streams while minimizing reliance on borrowing.

“As a result, the overall fiscal deficit is expected to decline to 3.9 per cent from the current 5.5 per cent,” the paper noted.

In terms of borrowing, the government plans to secure an additional Sh326.2 billion externally, up from the initial projection of Sh297.0 billion. Conversely, domestic borrowing has been scaled down from Sh499 billion to Sh377.4 billion.

This strategic shift suggests a preference for external funds to meet financial requirements, possibly to take advantage of favourable international borrowing conditions. A noteworthy adjustment in the fiscal deficit target has also been made, with the goal revised downward from 4.4 per cent of the gross domestic product (GDP) to a more conservative 3.9 per cent. This revision aligns with the government’s commitment to maintaining fiscal discipline while pursuing expansionary policies to fuel economic growth.

Simultaneously, the Treasury has earmarked Sh438.9 billion for allocation to counties, representing a substantial 14.0 per cent increase from the previous financial year.

This move reflects the government’s dedication to devolution and addressing regional disparities by empowering local governments to spearhead development initiatives. The proposed budget for the 2024/25 financial year signifies a delicate balancing act between stimulating economic growth, managing fiscal deficits, and ensuring responsible financial management.

As the government navigates this path, all eyes will be on the effective implementation of these plans and their impact on the nation’s economic trajectory.