Treasury Cabinet Secretary Njuguna Ndung’u lowered Kenyans’ expectations before the reading of his maiden finance budget for the 2023/2024 Financial Year.
Speaking a few hours to the budget reading, the CS explained why the country had to make tough choices, especially in taxation.
He pointed out internal and external factors that made President William Ruto’s administration increase the tax revenue collection basket.
In particular, Ndung’u explained that the government had to make tough choices because of persistent drought, the war in Ukraine and international economic shocks.
“This is the first budget I am going to present as Treasury CS. This is at a time when we are coming from a very devastating economic slowdown,” he explained.
The former Central Bank of Kenya (CBK) Governor noted that in a span of three years, Kenya was engulfed in a series of economic misfortunes.
“Even before we could overcome the pandemic, there was supply-side disruption and a high cost of energy because of the Ukrainian crisis.
“On top of that, there was a devastating drought that we had never seen in the last forty years,” the CS stated.
Ndung’u explained that as a ministry head, he was working towards raising the tax revenue ratio to the country’s Gross Domestic Product (GDP).
He regretted that the ratio had dropped in the last administration from 22 per cent to 13 per cent.
The Treasury CS noted that President William Ruto’s administration had upped the figure to 15 per cent largely by instituting new taxes and would continue raising it for economic stability.
Ruto’s Ksh3.6 trillion is the highest budget estimate in the country’s history and will be financed majorly through taxation as guided by the Finance Bill 2023.
The Bill, which passed Parliament's second reading on Wednesday, June 14, proposes a raft of increased taxes notably through the fuel Value Added Tax (VAT) and widely unpopular Housing Fund Tax.
Once the bill is signed into law, Kenyans will pay 16 per cent VAT on fuel up from 8 per cent while employers and employees will be taxed 1.5 per cent for the Housing Fund.
On Tuesday, June 13, Ruto maintained that he would finance his development agenda through taxation and not through seeking foreign debts.
"I have said that I will not go to borrow, that one I will not do," he vowed.
