Austerity Fails to Contain Public Spending Spree

Despite freezing new development projects, instituting budget cuts and a freeze on hiring, the National Treasury was unable to tame State expenditure. Budget outlook paper recently published by the Treasury shows it only managed to save Sh149 billion by mostly cutting on pension, operations and maintenance.

Treasury managed to save Sh39.3 billion on development spending, confirming doubts that it could not renege on project commitments after President Uhuru Kenyatta announced that all new projects would be frozen until ongoing ones are completed in July.

The treasury had estimated that hundreds of billions would be freed up by the order but ended up splashing Sh 300 billion on projects. The budget assessment shows that the Government saved Sh13 Billion on pension following an exercise to weed out ghost retirees.

Even as the government made efforts to cut spending, revenues fell further by Sh123.5 billion, cancelling out the gains and pushing the treasury to borrow Sh 721 billion from a target of Sh650 billion. The Treasury has this year again announced new round of budget cuts on non-essential items like trips, training and car expenses but many feel this may be cosmetic in terms of delivering an affordable budget. When governments run out of money to spend and room to borrow, they either find new avenues to raise taxes or cut expenditure.