Gov’t to slash budget by Ksh.177B, borrow Ksh.169B to offset Ksh.346B Finance Bill setback

President William Ruto has outlined a revised fiscal strategy aimed at addressing revenue deficits in the 2023/24 national budget, triggered by the withdrawal of the contentious Finance Bill, 2024.

In an address to the nation at State House, Nairobi on Friday, Ruto highlighted that the Bill's withdrawal had left a Ksh.346 billion deficit in the budget, further emphasizing the need for decisive action to manage the shortfall.

"The consequence of withdrawing the Finance Bill is the reduction of our revenue targets by Ksh.346 billion. Over the last few days, our Treasury team has been assessing the adverse impact of either reducing the budget by Ksh.346 billion in full or borrowing the amount in full," he said.

According to the President, discarding the full amount from the budget is not feasible as it would significantly affect the delivery of essential government services, while borrowing the amount, in its entirety, will also occasion a fiscal deficit that will have considerable repercussions on many sectors including exchange and interest rates.

"We have since, after extensive consultations, struck a middle ground and we will be proposing to the National Assembly a budget cut of Ksh.177 billion and borrowing the difference," he said.

"Whatever we are going to borrow will increase our fiscal deficit from what I intended to be 3.3 per cent of our GDP, to 4.6 percent of GDP, which is still lower than last year."

The borrowed amount, Ruto added, will be allocated strategically to safeguard crucial government initiatives.

"They include hiring of JSS teachers, medical interns, funding the milk stabilisation process for our dairy farmers, reviving our stalled road projects in many parts of Kenya, retaining the fertiliser subsidy programme, capitalising the coffee cherry fund to support farmers in that sector, enabling public owned sugar mills to pay outstanding debt to sugarcane farmers for their deliveries," he said.

"The additional funding for the higher education new funding model that was in our plan will now receive additional funding, settling arrears owed to counties, settling arrears for NG-CDF and setting arrears for our pension."