National Treasury: There is a weak global economy

Treasury CS Ukur Yatani (right) flanked by PS Julius Muia, during a consultative meeting on financial management for State corporations at Kenya Revenue Authority (KRA) in Nairobi. [David Njaaga/Standard]

The Government has promised to tame its high spending in the next budget by ensuring fiscal discipline.

National Treasury Principal Secretary Julius Muia says they hope to achieve fiscal consolidation by curtailing public expenditures.

The PS said Treasury would cut spending while at the same time raising more revenue in what is aimed at keeping debt at manageable levels.

The PS made the assurance when he appeared before the National Assembly Finance Committee chaired by Joseph Limo (Kipkelion East). He said the Government had given a broad endorsement to achieve the targeted balanced budget.

Mr Muia was defending the Budget Policy Statement (BPS) tabled by the National Treasury for the 2020 fiscal year. He said he believed the reform programme put forward by the government was sufficiently ambitious to address the challenge.

Muia added that the government targeted to gradually reduce its financing deficit from 7.7 per cent of Gross Domestic Product (GDP) registered in 2019 to three per cent by the financial year 2023/24.

To boost revenue performance and enhance tax compliance, Muia said the government was implementing system integration to allow for third-party data matching to improve tax revenue.

Global trends

He reckoned the BPS had been prepared against the backdrop of a weak global economy, adding that the recurrent expenditures stood at Sh1.7 trillion, while development expenditure amounted to Sh587.3 billion, which represents 15.3 per cent and five per cent of GDP respectively.

According to Muia, the 2020/21 revenue collection, including Appropriation in Aid (AIA) is projected to increase to Sh2.13 trillion, which is 18.3 per cent of the GDP, up from the estimated target of Sh2.08 trillion. Of these, ordinary tax revenues in the 2020/21 financial year will amount to Sh1.85 trillion, which is 16 per cent of the GDP, up from the estimated Sh1.84 trillion recorded in the 2019/20 financial year.

He said the global economy was also projected to grow marginally by 3.3 per cent in 2020, up from the estimated 2.9 per cent recorded in 2019. The sluggish global growth is on account of weak global trade and subdued investment and demand for capital goods.

Muia told MPs the fiscal operations of the government by the end of January 2020 resulted in an overall deficit of Sh315 billion against a targeted deficit of Sh361.8 billion, while the overall deficit in a corresponding period in 2019 stood at Sh332.1 billion.

The new team at Treasury, led by Cabinet Secretary Ukur Yatani, have been calling on state corporations to enhance cost control measures with the aim of delivering services in the most cost-effective manner.

Mr Yatani reminded Chief executives of State corporations that incurring expenditures not approved by their parent ministry and the Exchequer is irregular and that they will be held personally liable.

On Wednesday, Yatani read the riot act to accounting officers of parastatals for failing to remit billions of shillings in statutory deductions. He also lashed out at CEOs of State corporations for wasting funds, noting that some took loans to pay salaries.