The Treasury’s advisory includes a detailed table outlining the rationalisation measures across various government departments
The National Treasury is bracing itself for a series of major budget cuts in different sectors in the event the controversial Finance Bill 2024 is rejected in its entirety.
Treasury Cabinet Secretary (CS) Njuguna Ndung’u, in a letter addressed to the Clerk of the National Assembly, warned that failure to pass proposed tax measures outlined in the Finance Bill could result in a substantial revenue shortfall of Ksh200 billion for the fiscal year 2024/25.
This shortfall poses a significant threat to the country’s financial stability and its ability to meet budgetary obligations.
The CS observed that the new measures are important to “remain within the provision of Section 40 (5) (a) and Section 50 of PFMA, 2012, Cap 412 A”.
Treasury CS Njuguna Ndung’u reading the 2024/25 budget in Parliament on June 13, 2024. /NATIONAL TREASURY
The letter outlined the dangers of the situation, urging Parliament to consider against heeding growing calls to reject the Bill wholly, explaining how adjustments or failure to pass the Finance Bill 2024 will force a review of the budget that was recently presented in the House.
In the event of the bill’s rejection, the Treasury warned that there will be a need for stringent expenditure rationalisation, a move that could trigger reduced funding for critical services and development projects, hitting several key government departments and state functions where it hurts most.
The Treasury’s advisory includes a detailed table outlining the rationalisation measures across various government departments, measures which aim to streamline operations and ensure that essential services continue to receive funding despite the anticipated revenue shortfall.
The proposed cuts reverse previously planned increases across Ministries, Departments, and Agencies (MDAs) as detailed in the Appropriations Bill for the 2024-25 financial year.
The Judiciary is for instance set to lose Ksh2 billion, Parliament Ksh3.1 billion and the Executive Office of the President Ksh451 million. State House will also see a reduction of Ksh500 million from its budget.
Key state departments to be affected are Basic Education facing a reduction of Ksh3.4 billion and Medical Services losing Ksh4.7 billion meant for medical interns and equipment services.
Others are Roads Ksh15.1 billion, Agriculture Ksh6.7 billion, Social Protection Ksh5.5 billion and Teachers Service Commission Ksh18.9 billion.
Treasury has further proposed a Ksh2 billion reduction affecting the Ministry of Interior, Water Ksh11.6 billion, Ethics and Anti-Corruption Commission (Ksh200 million) and the Independent Electoral and Boundaries Commission (IEBC) Ksh185 million).
Defence will see a Ksh7.7 billion reduction which includes Ksh2.75 billion for security operations and Ksh5 billion for modernisation. Also to be affected include the Registrar of Political Parties Ksh900 million and the National Police Service Commission (NPSC) Ksh50 million.
Key allocations and potential cuts
- HELB Ksh3.2B
- Last mile connectivity Ksh19B
- ICT Authority Ksh6.7B
- Waterworks debt. Agencies Ksh11.6B
- Galana Kulalu Ksh1B
- KRA Ksh4.7B
- Kenya Airways (KQ) Ksh1B
- Pending Bills Ksh5B
- School feeding programme Ksh1.8B
- School infrastructure Ksh1.6B
- Counties Equitable share Ksh5B
- Medical interns Ksh3.7 billion
- JSS interns’ employment deferred Ksh18.5B
- Cash transfers (senior citizens & vulnerable) Ksh5.5B
- NG-CDF Ksh15B
- State House Ksh500m
- Executive OP Ksh451m
- MoD (Defence) Ksh7.75B
The new measures came amidst a decision by the Kenya Kwanza MPs to drop some of the contentious tax proposals in the Bill. Finance Committee Chair Kimani Kuria announced on Tuesday, June 18 that the government was able to respond to the feedback of Kenyans through the reduction of taxes.
“We are all in agreement that there are two things we must do. One of them is to protect Kenyans from the increased cost of living and therefore the proposed 16 percent VAT on bread has been dropped,” Kuria stated.
“To support again on reducing the cost of living, we’re doing something about vegetable oil so that we do not make it expensive for Kenyans.”
Read more: No VAT Tax On Mobile Money Transactions & 15 Changes To Finance Bill 2024
Molo MP Kuria Kimani speaking during a Kenya Kwanza Parliamentary Group meeting at State House, Nairobi on June 18, 2024. /PCS