Cabinet Secretary Treasurer Henry Rotich and his PS Kamau Thugge at a past press briefing. File/Standard
NAIROBI: The Government needs to manage its development costs or end up borrowing heavily to finance the budget, according to a new report.
Ratings agency Moodys says the Government has more control over development spending than the wage bill and will have to go slow on projects if the country is to meet the debt level targets set by the National Treasury.
“Kenya has to cut development spending to sustain the debt which is expected to rise to 57 per cent of the gross domestic product,” says Moodys.
The agency says cutting spending on development would help the Government achieve the two percentage point reduction of the gap between revenues and expenditure.
“Mr Speaker, in this budget, we shall continue to progressively reduce the fiscal deficit and ensure the continued sustainability of our debt. In this regard, in the financial year 2017/18, we project the fiscal deficit to decline to six per cent of GDP from an estimated nine per cent in the FY 2016/17,” said Treasury Cabinet Secretary Henry Rotich in his budget statement last week.
CS Rotich said such an impressive feat would be achieved since the Government had one-off costs to settle this year, pushing up spending significantly, but that these will not recur in 2017/18 fiscal year.
“The sharp reduction of the deficit reflects reduced expenditures owing to the one-off expenditures, mainly those related to the General Election and the drought, which are not expected to recur,” he said.
Mr Rotich said with current rationalisation of Government spending on the wage bill, the deficit is expected to narrow to four per cent of GDP by 2019/20, which will lower the country’s debt-to-GDP ratio.
President Uhuru Kenyatta in his last address to the nation complained about the public wage bill, which currently stands at Sh627 billion per year, amounting to 50 per cent of total revenues.
The Government has, however, offered the public service higher salaries to woo voters.