NAIROBI, Kenya, July 5 – The government plans to borrow more to fill the budget hole left after the removal of the Finance Bill 2024 by President William Ruto, which was to raise Sh346 billion in additional taxes.
In an address to the nation, the Head of State announced that the state will borrow Sh169 billion and cut government expenditure by Sh177 billion to bridge the budget deficit for the 2024–2025 financial year (FY).
This, he said, is crucial in allowing his administration to hire junior secondary school (JSS) teachers and medical interns, revive stalled road projects, retain fertilizer subsidy programs, enable government-owned sugar companies to pay farmers outstanding debts, and settle debt owed to farmers in the coffee sector in constituencies as well as counties.
President Ruto nonetheless warned that the removal of the Bill will slightly increase the government’s fiscal deficit to 4.6 percent of GDP, up from a previous target of 3.3 percent of GDP in the 2024–25 fiscal year.
“Cutting the entire amount would significantly and entirely alter the delivery of critical government services, while borrowing the whole amount in full would occasion a fiscal deficit by a margin of Sh346 billion that would have a significant repercussion on many sectors, including our exchange rate and interest rate,” President Ruto said at State House Nairobi.
“We have since, after extensive consultations, struck a middle ground, and we will be proposing to the national assembly a budget cut of not the entire Sh346 billion but a budget cut of Sh177 billion and borrowing the difference,” he added.
After the budget cut, he stated that 47 state corporations with overlapping and duplicating functions would be dissolved, with affected staff seconded to overlying ministries as well as other government agencies.
The number of advisors in the public service will also be slashed by 50 percent as part of the austerity measures taken by the government.
Revenue allocations to the spouse offices of the president, deputy president, and prime cabinet secretary will be removed.
Likewise, the government will cut renovations in government by 50 percent, with state officers banned from making any contributions to harambees.
Extensions for retired civil servants have also been dropped, with non-essential travel suspensions by public officers also imposed.
President Ruto was forced to remove the controversial Finance Bill 2024 after sustained protests that turned deadly, opposing its implementation.
The Bill had recommended a raft of new taxes on sanitary pads under ‘eco-levy’, a 16 percent VAT on bread, as well as additional charges on mobile money transfers.
However, the protests later turned ugly, resulting in the destruction of properties and the loss of lives across the country.
