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- Treasury plans to slash Fiscal Deficit to 4.5pc by 2025/26
The National Treasury has budgeted to cap the fiscal deficit at 4.5 percent of gross domestic product(GDP) during the 2025/26 fiscal year from 5.1 percent this year.
This is under the government’s proposal to rationalize public spending and address the fiscal challenges facing the country.
Kenya, in the long term, aims to reduce the fiscal deficit to 2.7 percent of GDP by the 2028/2029 fiscal year.
Revenue deficits and debt servicing at an all-time high are a constraint to Kenya’s fiscal growth highlighting the importance of achieving sustainable public finances as well as macroeconomic stability.
A previous Cabinet session chaired by President William Ruto approved budget realignments as a move towards fiscal responsibility and public debt containment.
To achieve this, President Ruto directed ministries and State departments to review their expenditure and adjust as necessary in consultation with the National Treasury on a close basis.
To facilitate the government to focus on development priorities, the government is adopting long-term cost-saving measures like dissolving 47 state-owned institutions with overlapping mandates and combining their functions into respective ministries.
Among others priority considered were reducing the number of government advisers by at least 50 percent, eliminating budgets for First Lady offices, Deputy President Spouse and the Prime Cabinet Secretary Spouse, eliminating confidential budgets from executive offices and refinancing foreign debt through the use of concessional and green financing options.
By this method, the government is likely to achieve a more balanced fiscal position, reduced public debt risk, and fiscal space to fund required public goods and services.
