The Treasury Cabinet Secretary, Njuguna Ndung’u, has issued a directive to halt all new projects for the fiscal year 2024/25.
This sweeping mandate, communicated through a circular to all Cabinet Secretaries, Permanent Secretaries, and Accounting Officers in government agencies, demands the rationalisation of projects facing implementation challenges.
This move comes as the government attempts to trim the budget following the rejection of the Finance Bill 2024 which aimed to raise Ksh346 billion in fresh revenue.
Ndung’u has emphasised the need to remove new projects and rationalise those with difficulties in implementation. The circular, dated July 5, also outlines the rationalisation of Budget Estimates and the review of counterpart funds.
In a further tightening of fiscal policy, the National Treasury has limited spending for FY 2024/25 to 15 per cent of the approved budget until the approval of the FY 2024/25 Supplementary Estimates No.1.
Ndung’u stated, "The government will control expenditures by initiating austerity measures on the provisions for the operations and maintenance. These measures will be undertaken in all MDAs, including SAGAs, in the expenditure areas."
On Friday, President William Ruto slashed Kenya’s 2024/2025 budget by Ksh177 billion, a move influenced by public protests against proposed tax increases. Despite the government's call for citizen sacrifices, many Kenyans argue that the cost of governance remains excessively high.
The decision to reduce the 2024/2025 budget to Ksh3.67 trillion is part of a series of compromises by the government. The budget cut aims to address growing calls for President Ruto’s resignation.
"Over the last few days, our treasury team has been assessing the adverse impact of either reducing the budget by Ksh346 billion in full or borrowing the Ksh346 billion in full," Ruto explained in a televised address.
He added, "Cutting the entire amount, in our assessment, would significantly and drastically affect the delivery of critical government services, while borrowing the whole amount in full will occasion a fiscal deficit by a margin that will have significant repercussions on many sectors, including our exchange rate and interest rates."
To mitigate these challenges, the government will secure loans to maintain funding for several crucial areas.
These include hiring junior secondary teachers and medical interns, supporting the milk stabilisation programme for farmers, and continuing the fertiliser subsidy programme.
Additionally, the government will settle debts owed to coffee farmers, provide more funding for higher education, and clear arrears owed to county governments and pensions.
The government will borrow Ksh169 billion.
