Treasury to Slash Government Spending Once Again as it Seeks to Achieve Projected Deficit

The National Treasury is set to cut governments expenditure even more in a move to achieve the projected fiscal deficit of 5.7 percent by June 2019.

According to the latest report from the Commercial Bank of Africa (CBA), the National Treasure has a tight balancing act of cutting expenditure without harming the prospects of growth.

The decision to opt cutting expenditure has majorly been as a result of the shortfall for tax revenue for the three months to September which was less by 60.5 billion shillings making it 320.3 billion shillings against a target of 380.8 billion shillings.

Treasury further revealed that all main tax classes; income, customs, VAT, and excise had underperformed during the same period thus failure to hit the target.

The deficit, which in the 2017/18 fiscal year stood at 7.2 percent, is expected to contract further to three percent by June 2021.

In targeting a lower fiscal deficit, the Treasury has largely banked on improved revenue performance, given that the budget for the current fiscal year reflects an expansion on the previous year’s outlay in terms of expenditure projections.

The cuts are, however, mainly on the development vote, leading to a caution from the World Bank last month that cutting development budget to reduce budget deficits and borrowing may stifle growth in the near future.

The World Bank further warned that these non-recurrent cuts at a time private sector is also struggling to access credit could leave the economy running at a sub-optimal level.

The government had already cut its expenditure after an announcement in September by the National Treasury for a 55.1 billion shilling cut for the current financial year, in response to a public uproar over high spending and taxation.

In the expenditure estimates, Treasury slashed the national government budget from 3.026 trillion shillings to 2.97 trillion shillings. The exchequer trimmed recurrent spending from 1.072 trillion shillings to 1.06 trillion shillings, saving 11.7 billion shillings.