State, agencies stare at huge budget cuts

Parastatals and government’s capital projects are staring at massive cuts following a reduction in its budget by a whooping Sh273.3 billion as a result of low revenue collection.

 Budget summary from the National Treasury tabled in the National Assembly shows that the national government’s budget has been reduced from Sh4.2 trillion in the approved Budget Policy Statement (BPS) to Sh3.91 trillion translating to a reduction of Sh273.3 billion.

The report explains that the reduction in the budget is due to underperformance of revenue in the financial year 2023/2024 due to challenges experienced in resource collection.

Revenues, the report explains, have been below target adding that previously the resolution of the Eurobond 2024, domestic liquidity and borrowing was also constrained.

Reads the statement: “Following the underperformance of revenues in FY 2023/2024, the projected revenues in the approved 2024 Budget Policy Statement (BPS) have been revised accordingly to reflect this reality on the baseline. Estimates have been reduced by Sh273.3 billion from the approved 2024 BPS.”

 It adds: “By end of March 2024, total revenue was below target by Sh270.7 billion out of which ordinary revenue had a cumulative shortfall of Sh255.1 billion. Due to the shortfalls in revenue and liquidity constraints, both recurrent and development expenditures remained below target.”

 It also states that to remain on course on the path of fiscal consolidation, there is need to contain borrowing and rationalize expenditures to sustainable levels,

State grants reduced

 Following the revision of the budget, the areas to be affected include state corporations which will see government’s grants reduced to not more than 70 percent of the approved budget in the financial year 2023/2024, budget for non-priority expenditures in the recurrent budget has been reduced by up to 50 percent while expenditure for foreign travel has been frozen.

 As at June last year, the total outstanding loans by the national government to state corporations, government agencies and other organizations stood at Sh974.2billion.

 The report reveals that preliminary assessment of the review of all Semi -Autonomous Government Agencies (SAGAs) by the national treasury shows that 158 state corporations will be retained, 41 with duplicating /overlapping mandates will be merged, 25 corporations will be wound up and transferred back to the ministry/ relevant state corporation, four state corporations will be restructured.

Policy guidance

Seven state corporations whose mandate or functions require policy guidance and 25 entities are earmarked for privatisation and are being implemented in accordance with the Privatization Act 2023.

 Other areas that will be affected by the reduction in the budget includes scaling down funding of the government capital projects budget by up to 30 percent in the financial year 2024/2025 and scaling down funding of development’s partners funded projects by 25 percent.

 In this regard, out of the Sh3.9 trillion, the allocation to the executive amounts to Sh2.2 trillion from Sh2.5 trillion in the BPS consisting of recurrent allocation of Sh 1.51 trillion and development allocation of Sh 724.4 billion.

 Consolidated Fund Services (CFS) allocation amounts to Sh1.2 trillion, which includes allocation to cater for domestic interest payment of Sh749.9 billion and foreign interest payment of Sh259.9 billion while pension, salaries and allowances allocations amounts to Sh203.6 billion.

 The allocation for county governments include Sh391 billion equitable share as provided for in the Division of Revenue Bill and additional allocations (conditional) amounting to Sh54.9 billion including loans and grants.

 Allocation for the Judiciary amounts to Sh23.7 billion while allocation to the judiciary stands at Sh23.7 billion.

  Reads the report: “In this regard the allocation to the executive has been rationalized from the approved Sh2,488.6 billion to Sh2,243.1billion. The allocations to Parliament and the Judiciary have however been maintained as approved in the 2024 BPS.”

Five clusters

 In terms of sector allocations, the report shows that Sh257.3 billion has been allocated to five clusters namely Finance and production (Sh43.6 billion), infrastructure (Sh98.2 billion), environment and natural resources (Sh20.6 billion), social sectors (Sh 85 billion) and governance and public administration (Sh9l.8 billion).

 On each sub sector allocation, the report shows that Agriculture and food security has been allocated Sh47.5 billion, transport Sh41.3 billion, Roads Sh178.6 billion, energy Sh64.1 billion, Housing and urban development and Public works Sh92.2 billion, Information, Communication and Technology Sh16.6 billion, National Security Sh373.5billion, Governance and Justice Sh13.3 billion education Sh 654billion and health Sh128.7 billion.

 Others are Manufacturing and Industrialisation Sh21.8 billion, social protection and affirmative action Sh31.2 billion, equity, poverty reduction, woman and youth empowerment Sh89.6 billion, sports culture and recreation and Tourism Sh23.6 billion and environment protection, water and natural resources Sh104.6 billion.

 Read the report: “ The Financial year 2024/2025 and the Medium term Budget will continue to focus on the implementation of the Bottom-Up-Economic Transformation Agenda (BETA).”