Tougher times ahead as Kenya plans to increase its recurrent budget

The government has slashed the development budget by Sh180 billion and increased the recurrent expenditure, a move that is likely to limit development activities in Kenya in the next financial year.

According to 2017 Budget Policy Statement (BPS) presented to the parliament, the increase in the recurrent expenditure budget is occasioned by the rising wage bill following an increase in salaries and allowances for teachers and nurses.

The recurrent expenditure is likely to be even higher considering that doctors are still on a countrywide strike demanding for 100 per cent salary increment.

An increase in recurrent expenditure is a blow to the Jubilee administration which is banking on infrastructure development to stir economic activities in the country.

This means that less funds will go to agriculture, manufacturing, transport and other key sectors of development, triggering low productivity, less employment opportunities and high inflation.

Last month, Consumer Price Index (CPI) put inflation in Kenya at 6.68, less than a percentile shy from Central Bank of Kenya’s maximum of 7.5 per cent.

According to the reported presented to the parliament early this week, recurrent expenditure has been increased by a whopping Sh102.4 billion in the 2017/2018 financial year with ministerial expenditure hitting Sh1.6 trillion.

The report, which was adopted by the House, increased the ministerial’ recurrent expenditure from Sh857.5 billion in the current financial year to Sh959.9 billion  while the development budget was slashed to Sh820.2 billion from Sh640.1 billion

The country’s Sh3 trillion debt level, which is playing above the 50 per cent ratio to the Gross Domestic Product (GDP), every Kenyan has at least Sh80, 000 debt on head

It is perhaps this realization that has seen the parliament task the National Treasury with responsibility to reduce the country’s deficit in the next financial year.

The parliament has capped borrowing at Sh500 billion which is equivalent to 6 per cent of the country’s GDP. The treasury had proposed Sh582.4 billion which is 7 per cent of GDP.

The increase of the recurrent budget could also have been prompted by the impending General Election slated for August next year.

Out of this, the national government will receive Sh1.24 trillion for its recurrent and development budget while the counties will get Sh299.1 billion. The counties will also receive Sh34 billion for conditional grants.

The BPS is a policy document, which provides a broad strategic direction that will guide the national and county government in formulating their annual budgets for a given financial year.