State eyes lower budget deficit for 2024/2025

The Budget and Appropriations Committee (BAC) says the government is making significant strides to reduce the budget deficit for the 2024/2025 financial year to 2.9 per cent of the gross domestic product (GDP), down from 4.9 per cent in the current financial year.

To achieve this reduction, the government has implemented measures such as reducing the recurrent expenditure of government parastatals by 30 per cent.

“We have been able to lower our deficit to only 2.9 per cent of our GDP, something that has not been seen in Kenya for a very long time. Because we have seen this as the only way to sustainably grow our economy by looking inwards,” explained Ndindi Nyoro, chair of the National Assembly’s Budget and Appropriations Committee. He said that this reduction in expenditure has enabled the government to lower its deficit and avoid excessive borrowing even as counties call for more money to take care of medical equipment.

Predictable tax regime

Speaking at the Annual National Conference of Economists 2024 in Mombasa, Nyoro emphasised the government’s commitment to maintaining a predictable tax regime and avoiding excessive taxation. He assured that upcoming budgets will focus on internal resource mobilisation rather than external borrowing.

Kenya’s debt surged to new highs crossing the Sh11 trillion mark. Despite the recent issuance of a new Eurobond worth Sh218.53 billion ($1.5 billion), concerns linger over Kenya’s debt sustainability, especially with the impending maturity of its debut $2 billion (Sh291.38 billion) Eurobond in June. The Parliamentary Budget Office (PBO) warns of a looming liquidity crisis, citing deteriorating debt service-to-revenue and debt-to-GDP ratios amidst declining revenue and escalating debt repayment obligations.

Nyoro highlighted plans to allocate resources where they are most needed, particularly in sectors such as education and agriculture. He emphasized the importance of creating an egalitarian society where everyone benefits from economic growth. Meanwhile, Fernandes Barasa, chair of the Council of Governors Finance Committee and Kakamega Governor, called for realistic allocations to counties in the upcoming budget.  He termed the current allocations as insufficient to meet the needs of devolved units, particularly in areas such as healthcare and infrastructure. In the current financial year, Barasa said counties were allocated Sh385.4 billion with the proposed allocation for the next financial year being Sh391 billion which is only Sh5.5 billion increase.

He said the amount allocated to counties is not enough considering the activities shouldered by the devolved units.

Medical equipment services

“For us to fully implement the doctors CBA we require Sh5.8 billion. We are now taking on board the medical equipment services which require almost Sh20 billion for procurement and servicing and the increased levies we require almost Sh4 billion. What we are telling the national assembly to be realistic with counties,” he said. According to the BAC chair, the next financial year budget estimated to stand at Sh3.913 trillion has been cut off by close to Sh300 billion. “We had to cut off the budget by close to Sh300 billion so that we make a budget that we can fund using the resources that we are sure we are going to attain,” Nyoro explained.