Why Government expenditure will supersede revenue collection by over Sh900 billion

Why Government expenditure will supersede revenue collection by over Sh900 billion
  • The hike in budget spending is as a result of the recently approved increase in the salaries of all civil servants starting July 2017
  • The government will use over Sh100 billion to finance the program
  • Kenya would spend Sh2.275 trillion in the next financial year, saying it would be backed by Sh1.69 trillion tax revenue
  • Budget expenditure has increased to Sh2.62 trillion in 2017/2018 down from Sh2.48 trillion it was in 2016/2017 fiscal year

Government spending is projected to exceed its revenue collections by Sh900 billion for the financial year 2017/2018, the National Treasury has revealed.

Treasury Cabinet Secretary Henry Rotich says the Government is targeting to collect Sh1.7 trillion in revenue for the 2017/2018 financial year against a record budget of Sh2.62 trillion.

The Treasury attributes the hike in budget spending to the approved increase in the salaries of all civil servants starting July 2017, which will see the government use over Sh100 billion to finance the program.

Read Also: KRA introduces smart app to detect fake goods as regulator moves to widen tax base

“The allocation is part of the harmonization of public sector salaries and allowances, including civil service pension, house and hardship allowances, recruitment of 10,000 police officers and 5,000 teachers,” reads a statement from State House.

To tackle the fiscal deficit, the Treasury is planning to provide sufficient room to finance productive expenditure so as to sustain equitable growth, a move that would further bridge the gap between revenue collection and government expenditure.

He said the government will further improve on its expenditure, enhance tax collections and reduce over-reliance on international debt to see the Sh900 billion difference between revenue collection and expenditure reduced by double digits during the financial year 2017/2018.

“The Government is banking on the on-going reforms in tax policy and revenue administration to improve revenue collection, even as it limits borrowing to international markets,” said Mr. Rotich.

Statistics from the Treasury show that budget expenditure has increased to Sh2.62 trillion in 2017/2018 down from Sh2.48 trillion it was in 2016/2017 fiscal year.

Read also: KRA misses target despite 13 per cent increase in revenue collection

Initially, the Treasury had projected that Kenya would spend Sh2.275 trillion in the next financial year, saying it would be backed by Sh1.69 trillion tax revenue.

These developments come just as the government buckles under pressure to intensify tax collection after latest data show a balance of Sh859 billion that must be raised in the next four to five months.

Treasury financials printed in December last year show that the Government had received a total of Sh473 billion in total taxes up to November. This is against the target of Sh1.3 trillion set for the Kenya Revenue Authority (KRA) by CS Rotich under the current budget. The KRA has been falling short of its ambitious collection targets.

In 2015, the Authority blamed a slump in tax earnings from Pay as Your Earn (PAYE) for its inability to raise Sh1.2 trillion.

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