Ruto proposes budget cuts to tame spending
President William Ruto yesterday embarked on the daunting task of resuscitating the economy by ordering the National Treasury to cut Sh300 billion from the current Budget.
In his inaugural address to Parliament, the Head of State said the re-organisation of the Budget would reduce the country’s spending pressure.
They would also reduce the government’s appetite for borrowing to fix the Budget hole, estimated to be close to Sh900 billion in the current financial year.
“We should never borrow to finance recurrent expenditure. It is not right, prudent or sustainable. It is simply wrong. We must bring ourselves and our country to sanity,” President Ruto told legislators as he outlined his agenda for the incoming administration.
Spending across the 2022/23 financial year has been estimated at Sh3.358 trillion against revenues projected at Sh2.462 trillion. This leaves a financing hole estimated at Sh862.9 billion to be plugged through Sh280.7 billion in foreign financing and Sh582.2 billion in net domestic financing.
Increased local borrowing risks push private and business borrowers from accessing bank loans as banks find it less lending to the government. In his statement, which lasted 34 minutes, President Ruto outlined the measures his administration intends to carry out to transform the economy, create jobs and provide social protection to citizens through increased savings and reforms in the health sector.
“We anchored our campaign on the platform of the economy premised on job creation and the well-being of the people and we have been working continuously on the measures to bring down the cost of living,” Ruto told the rapt house.
Among guests during yesterday’s event were Deputy President Rigathi Gachagua, First Lady Racheal Ruto, Chief Justice Martha Koome and her deputy, Justice Philomena Mwilu.
The introduction of the Independent Electoral and Boundaries Commission (IEBC), chairman Wafula Chebukati and former Chief Justice David Maraga was met with cheers by MPs.
On revenue mobilisation, President Ruto proposed reforms to the taxation system, including a culture change by the Kenya Revenue Authority (KRA) to make it people-friendly and customer-centric. He also proposed that it be renamed the Kenya Revenue Service.
“The tax burden must reflect the ability to pay. Those at the bottom of the pyramid should pay what is proportional. We will be proposing tax measures that begin to move us towards the right direction,” said the Head of State as he set out the tone and agenda of his administration which came to power after the August 9 General Election and Ruto’s subsequent swearing-in on September 13.
“I have instructed the Treasury to work with ministries to find at least Sh300 billion in this year’s Budget so that we can remove it because the market cannot sustain the kind of borrowing we are doing as a government.”
Without the proposed Budget cuts, public debt was expected to rise from Sh8.6 trillion at the end of June this year to Sh9.4 trillion by June next year. MPs set the debt ceiling at Sh10 trillion.
President Ruto also kept his campaign promise to increase budgetary allocation to the Judiciary. “Our campaign for financial independence of the judiciary has paid off with the implementation of the Judiciary Fund on July 1st this year.
My administration will scale up the budgetary allocation to the Judiciary by an additional Sh3 billion annually for the next five years.” He said the resources will support the bottom-up scaling of justice by increasing the number of small claims courts from the current 25 to 100.
“We will also work with the Judiciary to build High Courts in the remaining seven counties, magistrates courts in the remaining 123 sub-counties and support their ongoing digitisation programme.”
The interventions will empower the Judiciary to adjudicate and expeditiously conclude corruption cases, commercial disputes and other matters, thus enhancing access to justice.
To transform the police service, the President said he had instructed that the instrument conferring financial autonomy to the National Police Service by transferring their budget from the Office of the President and designating the Inspector-General as the accounting officer, be placed on his desk for signature.
“As required by Article 245 of the Constitution, the Inspector-General of Police is mandated to exercise independent command over the National Police Service. The services’ operational autonomy, however, has been undermined by the continued financial dependence on the Office of the President. This situation is going to change.”
War on graft
Financial independence of the police will give impetus to the fight against corruption, and end the political weaponisation of the criminal justice system; an undertaking that Ruto made during election campaigns.
Ruto also moved to reassure the public service of his government’s support by allowing State officers to work without intimidation.
“I understand the deep fissures and low morale in the public service. The intimidation that was visited on IEBC commissioners and staff during the last election was also meted on various other agencies and staff in the public service,” he said.
“This is now in the past. I assure all public officers that my administration will respect their professional service, and no public servant, even chiefs and their assistants, will be required to run political errands for any political party or formation.”
President Ruto also moved to assure his government’s commitment to addressing the cost of living, saying some interventions have been put in place to tackle inflation. “Our people are confronted daily with increasingly unaffordable prices, especially food and transport. In our economic forums across the country during the campaign, citizens consistently shared their anxiety, pain and fury on this matter. It calls for an urgent and decisive resolution,” he said.
He noted that the interventions put in place by the last administration have not borne fruit, adding that on the fuel subsidy alone, taxpayers spent Sh144 billion. Of this, Sh60 billion was paid out in the last four months.
“If the subsidy continues to the end of the financial year, it will cost the taxpayer Sh280 billion, equivalent to the entire national government development budget,” said President Ruto. He told the legislators that the attempt to subsidise maize flour in the run-up to the election gobbled up Sh7 billion in one month, with tangible impact.
“In addition to being very costly, consumption subsidy interventions are prone to abuse, they distort markets and create uncertainty, including artificial shortages of the very products being subsidised,” Ruto said in his justification for discontinuing the fuel and flour subsidies.
He also outlined a raft of measures that will need legislative interventions from both the National Assembly and Senate, including creating new standing orders to ensure that Cabinet Secretaries are accountable to the legislature.
He also proposed an oversight fund to give legislators the power to monitor and audit the billions given to devolved governments among other measures.