Treasury warns of painful cuts to Ministry budgets

The National Treasury has urged Ministries and State Departments (MDAs) to brace for painful budget cuts as the budget making process for the 2020/21 financial year begins.

According to the planning Ministry, the government remains keen on staying within its committed fiscal consolidation plan by slashing recurrent expenditure even as domestic revenue mobilization remains an insurmountable task at this time.

Consequently, Acting Cabinet Secretary at the National Treasury Ukur Yatani has urged State agencies to expect cuts in funding for the subsequent financial years in the medium term to the year 2022, or at best, a hold in appropriation.

“The cuts will be brutal, sustained and without option. It is high time for us to adjust accordingly because the success of the government will depend entirely on our dignity as a country to be self sufficient in our own development priorities,” he said.

The remarks by Yatani which came during the official launch of the budget making process for the next financial year on Thursday came on the back of falling revenue performance against a pent up recurrent spend.

Data from the National Treasury placed the shortfall in ordinary revenue in the 2018/19 fiscal year at Ksh.91.2 billion and largely as a result of a poor performance in the other tax income bracket to the tune of Ksh.46.9 billion and the suspension to provisional tax collection to October 1.

The shortfall is subsequently mirrored in shortfalls to recurrent and development expenditures in spite of a narrowed fiscal deficit to 7.6 percent of Gross Domestic Product (GDP) during the year.

Meanwhile the out and out daily spend has remained on the rise having jumped by 10.9 percent largely as a result of interest payments on external loans.

To rope in extended growth recurrent expenditure by ministries, the National Treasury has urged ministerial sector working groups to scale up on their engagement with members of public while weeding out unnecessary expenditure to maximize on resource prioritization and allocation.

Treasury has backed the sector working groups’ quest through amendments to the 2019/20 budget, presently under the consideration of parliament which are centered on taming the wage bill.

Among the proposals presented to the National Assembly floor in mid June include the proposal to track public officers’ travel costs using an electronic card system, the rationalization of office leases and the migration of the current payroll into the Integrated Finance Management Information System (IFMIS).

“We will continue to take bold actions to contain our expenditures further in the next financial year in order to further reduce the deficit,” noted Yatani’s predecessor at Treasury, Henry Rotich.

The medium term sector ceilings as set out in the 2019 Budget Policy Statement (BPS) have already hinted at the projected hold in ministry appropriations.

The share of expenditure to the education ministry which currently gobbles up the largest pie of appropriations is set to grow marginally to 26.4 percent as at the 2021/22 financial year from the current 25.3 percent portion.

In contrast, the allocation to energy, infrastructure and ICT is set to fall to 22.1 percent from the current 23.9 percent to Ksh.422.2 billion.