The National Treasury has admitted the country is cash strapped and cannot meet all its financial obligations.
On Wednesday, Treasury CS Henry Rotich told the Senate committee on Finance and Budget that Funding of key government projects has been affected by the cash crunch and also county governments whose revenue will be slashed by between Sh15 billion and Sh17 billion.
“We need to discuss with you [senators] and governors that the figure which we put on the table is not feasible based on the challenges that I have explained,” the CS said according to the Star.
Rotich blamed the situation on Kenya Revenue Authority for failing to meet revenue collection targets. He also cited a prolonged electioneering period as another cause of the cash crunch.
Government has a shortfall of Sh70 billion in its revenue collection in the current financial year – 2017/2018 inspired by a combination of domestic and international loan repayments among other factors.
However, said Rotich “We have discussed with the KRA how to catch up by tightening the tax net on the domestic and Customs revenue.”
He called for austerity measures by government institutions as a pragmatic move to ensure services are delivered even with the current situation.
“Every institution must tighten its belt. We have adopted a tighter fiscal framework to reduce expenditure. We have to cut expenditure across the board so that we can match with our revenue,” cautioned the CS.
The admission that the government is broke is likely to harden lives of ordinary Kenyans as the government borrows locally which will make it hard for small businesses to access credit from the banks.
Kenya’s debt as at December last year stood at Sh4.55 trillion. About 54 per cent of the country’s revenue goes to debt repayment.
Rotich now wants Parliament to reduce the allocation of money given to the counties.
“We want Parliament to reduce the allocation given to the counties. We want the Division of Revenue Bill amended to lower than the Sh302 billion,” Rotich told the committee chaired by Mandera Senator Mohamed Maalim Mahamud.
Counties have been indicted for spending a large share of their revenue to recurrent expenditure leaving just a meager amount for development. Currently, they spend on average 78.3 per cent on salaries against the Controller of Budget’s recommended level for county salary expenditure of 35 per cent of total expenditure.