The government has proposed a reduction of Sh177 billion in this year’s budget following the withdrawal of the Finance Bill 2024, which led to a decrease in revenue targets.
President William Ruto announced the decision during a press briefing at State House on Friday.
The President had refused to assent to the bill, sending it back to Parliament after protests against it. Protesters argued that the bill would impose higher taxes.
“The consequence of withdrawing the Finance Bill is the reduction of our revenue targets to Sh346 billion,” President Ruto said.
He revealed that the Treasury had been evaluating the impact of reducing the budget by Sh346 billion in full or borrowing the entire amount.
Also Read: President Ruto Appoints Task Force For Comprehensive Public Debt Audit
He noted that cutting the entire amount would significantly affect government services, while borrowing in full would create a fiscal deficit that could negatively impact various sectors, including exchange rates.
“We will be proposing to the National Assembly a budget cut of Sh177 billion and borrowing the difference,” Ruto stated.
This proposal would increase the fiscal deficit from 3.3 percent to 4.6 percent of GDP, which is still lower than last year’s deficit.
The borrowed funds will be allocated to protect critical areas such as:
- Hiring Junior Secondary School teachers and medical staff
- Funding the milk stabilization program for dairy farmers
- Reviving stalled road projects
- Retaining the fertilizer program
- Settling debts in the coffee sector
- Paying sugar farmers
- Supporting higher education funding
- Settling arrears in the National Constituency Development Fund (NCDF) and pensions
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