In Summary
  • The exchequer is alleged to have used a set of numbers that ignores adjustments masking the true deficit.
  • A budget deficit, also known as a budget hole, occurs when expenses are more than revenue.
  • It is the difference between the amount of money the country can raise from its internal sources of revenue.

The National Treasury is hiding Kenya’s true budget deficit by using wrong figures, the Parliamentary Budget Office (PBO) has said.

The Budget Office, which is funded by the taxpayer to provide professional services to Members of Parliament, says Treasury is masking the true deficit by using a set of numbers that ignores adjustments.

BORROWING

The office also accused Treasury of overshooting the budget ceiling given by Parliament and approved through its own Budget Policy Statement (BPS), which is prepared months in advance. The PBO says the 2019/2020 budget is higher than the approved ceiling by Sh78 billion.

“The higher expenditure levels have been accommodated through upward adjustments in the revenue projections from the BPS level by approximately Sh35 billion,” the PBO report to Parliament notes. The report, "Unpacking the Estimates of Revenue and Expenditure for 2019/20 and the Medium Term", is prepared for legislators to guide them in deliberations over the next budget cycle that starts on July 1.

“This masks the true deficit by seemingly maintaining it at the BPS level despite the higher expenditure adjustments,” PBO says in its report.

A budget deficit, also known as a budget hole, occurs when expenses are more than revenue. It is the difference between the amount of money the country can raise from its internal sources of revenue, mainly through taxes and Appropriations in Aid, and its actual budget.

“Should the economy not perform as expected, there will be need to drastically reduce the budget deficit through a supplementary. This undermines the credibility of the budget and is the main reason behind pending bills and stalling of projects,” the PBO report says in part.

The fiscal deficit is projected at Sh607.8 billion (5.6 per cent GDP). This will be financed through net external financing of Sh324.3 billion, net domestic borrowing of Sh289.2 billion and other domestic receipts (Sh5.7 billion).

RECURRENT
“It should be noted however, that a low fiscal deficit has been a moving target for the government,” PBO says.

Treasury, however, maintains that it has been working to reduce the budget deficit over the years. Principal secretary Kamau Thugge told Nation that the fiscal deficit has been narrowing from nine per cent of the GDP in 2016 to 6.8 per cent this year.

“The budget submitted to Parliament in April reduces it further to 5.6 per cent of GDP,” he said.

The deficit is not the only thing the PBO has disagreed on with the National Treasury.

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