Major roads and housing projects as well as funding for small businesses face disruption as the Treasury struggles with disbursements due to revenue challenges.
The lack of funding will also leave Kenyans with poor medical, water, electricity and education services, with the Treasury failing to release billions of shillings planned for development, despite raising a raft of taxes last year.
As of the end of May – the month to the end of the 2023/24 fiscal year in June – the Treasury has released only Sh261 billion out of the Sh481 billion earmarked for development projects by the national government.
Analysis of the latest Treasury data shows that while the exchequer released more than half of the original development budget for the 2023/24 fiscal year in 11 months, the main department driving President William Ruto’s economic agenda generated more than 90 percent of unfunded development.
The Treasury did not release Sh53 billion out of Sh88 billion originally planned for road construction and repair, the state department for medical services was funded with only Sh15 billion out of Sh40.8 billion and in housing, only Sh5.4 billion out of Sh28.3 billion has been released in the end May.
The Treasury has been struggling to meet funding requirements in national and county governments, as the Kenya Revenue Authority (KRA) faced difficulties in collecting taxes, closing May with a balance of Sh567 billion. KRA has by the end of May collected Sh1.9 trillion in taxes, out of the budgeted Sh2.49 trillion for the fiscal year ending this June.
The tax shortfall of Sh567 billion, which must be collected this month if KRA is to meet its target, is three times more than the average monthly collection made by tax officers between July 2023 and May 2024 and means the Authority must collect daily. an average of Sh18.9 billion per 30 days this month.
The Treasury initially set Sh2.57 trillion as the tax collection target for the current fiscal year, following a series of measures that introduced new taxes and levies, including a 1.5 percent house tax and doubling of value added tax (VAT) on petroleum. products up to 16 percent. However, it reduced the target to Sh2.49 trillion due to KRA’s apparent struggles.
The lack of revenue that led to a reduction in development spending stressed the government’s head in pursuing its economic agenda.
“On the domestic front, the Kenyan economy is currently unwinding from layers of negative and persistent shocks that have structural effects on economic activity.
“We continue to witness external shocks and extreme weather events that not only affect economic activity but also pose major fiscal risks,” Treasury Cabinet Secretary Njuguna Ndung’u said in his 2024/25 Budget speech last week.
Data from the Treasury shows that of the Sh219 billion that the State did not release for agencies to implement planned development projects at the end of May, Sh203 billion will go to some 13 state departments.
The lack of revenue forced the government to revise its budget down from Sh480.8 billion to Sh457.2 billion.
Other departments heavily affected by the budget hole are the state energy department which received Sh8 billion out of Sh25 billion, economic planning which missed out on Sh14.6 billion from its original budget, and water which has yet to get Sh12.3 billion. Its budget is Sh28 billion.
The State Department for Micro, Small and Medium Enterprises (UMKM) was only given Sh1.6 billion of Sh11 billion to carry out development activities, a pointer to the challenges that can be faced in the drive to support other small enterprises access to cheap credit.
The Ministry of Foreign Affairs for investment promotion was also given Sh1.2 billion out of Sh6.5 billion, despite its critical role in creating a conducive environment for local and foreign investors to set up business and grow the economy.
The Treasury is struggling to release funds to the agency even after revising its budget downwards in the supplementary budget, leaving projects funded by the agency at risk of stalling.
“To strengthen economic recovery, the government will accelerate the implementation of policies, programs, projects, and interventions in BETA to promote agricultural transformation, support UMKM, provide affordable housing and settlements, and achieve universal health,” Prof. Ndung’u said last week. .
For the 11 months to the end of May, the 13 most affected state departments in terms of development funding took 92 percent (Sh203 billion) of the heat of all unfunded Sh219.6 billion development activities.
