The Treasury now targets borrowing about Sh652 billion for the financial year 2024/25, watering down an earlier debt plan by President William Ruto.
Whereas President Ruto had on July 5 indicated that borrowing was expected to increase by Sh169.7 billion to cater for the revenue shortfall occasioned by withdrawing the Finance Bill, 2024, estimates by the Treasury show the borrowing will only be revised upward by 9.2 percent or Sh54.6 billion.
This means that whereas the revised total borrowing target for 2024/25, according to the President, stands at Sh766.7 billion, the Treasury is eyeing a far more conservative Sh651.6 billion debt tap through Supplementary Budget I 2024/25.
According to data from the Treasury, there will be a larger increase in external borrowing which is now projected to shoot up by Sh37.1 billion, while domestic borrowing will increase by a more modest Sh17.5 billion.
“Total revenues have been revised from the initial projection of 18.5 percent to 17.5 percent of gross domestic product (GDP).
“Grants are projected at 0.3 percent of GDP. Net foreign financing has been revised from the original projection of 1.8 percent of GDP to 2.0 percent of GDP. Net domestic financing has been revised from the original projection of 1.5 percent of GDP to 1.6 percent”, the National Treasury states.
The government has missed the planned target for budget cuts for the financial year 2024/25 by Sh55.2 billion with Supplementary Budget I showing that the total spending for the financial year between July 1, 2024, and June 30, 2025 has been downgraded to Sh3.87 trillion, Sh121.9 billion lower than the figure approved by Parliament at the end of the financial year 2023/24.
“The total gross change of the Ministerial Estimates, County Sharable Transfer Allocation, and Consolidated Fund Services amounts to a reduction of Sh121.9 billion or a 1.9 percent decrease. This is within the provisions of Article 223 of the Constitution”, the National Treasury states in its release on the Supplementary expenditure plan.
On July 5, President Ruto said that the State had resolved to address the revenue shortfall created by the withdrawal of Finance Bill, 2024 by trimming the overall 2024/25 spending by Sh177.0 billion while increasing borrowing by Sh169.7 billion.
New projects
The State Department for Energy is the most affected by the budget cuts as the Treasury proposes to slash its allocation by Sh18.5 billion to Sh51.1 billion with the fourth phase of the Last Mile Connection taking the hit of the budget cut.
The State Department for Roads is the second most affected by the budget cuts as its expenditure for the financial year 2024/25 is downgraded by Sh14.5 billion to Sh184.8 billion as the government plans to slow-pedal on new projects in the roads sector.
Among the winners in the Supplementary Budget are the county governments with the proposed allocation on account of Equitable Share being revised upward from the initial Sh400.1 billion to the proposed Sh410.9 billion.
The State Department for Cooperatives is also another winner in Supplementary Budget I 2024/25 with the allocation set to increase by Sh1.98 billion while the State Department for Arid and Semi-arid Lands is earmarked for a Sh2.91 billion increase.
