Kenya’s Ruto vows to cut spending, borrowing in move ‘back to sanity’

PUBLISHED: Fri, 30 Sep 2022 12:53:32 GMT
George Obulutsa
Reuters
Share
Finance Minister Prof. Njuguna Ndung’u and CA DG Francis Wangusi
Image via: Reuters

Kenya’s new President William Ruto instructed the finance ministry on Thursday to cut 300 billion shillings ($2.5 billion) from annual government spending this year, to bring the country “back to sanity”.

Ruto, sworn in on Sept. 13, appointed his cabinet on Tuesday, naming former central bank governor Njuguna Ndung’u as finance minister to navigate the economy through rising inflation, a heavy debt burden and drought.

Ruto also said he aimed to bring the recurrent expenditure down further next year by an undisclosed amount, in a bid to achieve a recurrent budget surplus by the third year.

The president did not give details on the expenditure to be cut. Recurrent expenditure usually includes civil servant salaries, domestic and foreign interest payments, pensions and fuel costs for the government fleet of vehicles.

“I have instructed Treasury to work with ministries to find savings of 300 billion shillings in this year’s budget,” Ruto said in his first speech as president to parliament.

The 2022/23 budget was presented in April.

“Next year, we will bring it further down so that, by the third year, we have a recurrent budget surplus.”

The president said the government should never borrow to finance recurrent expenditure, adding, “the market cannot sustain the kind of borrowing we are doing as a government”.

“We must bring ourselves back to sanity.”

A finance ministry document issued earlier this month showed recurrent expenditures were projected at 2.27 trillion shillings or 16.2 percent of Gross Domestic Product in the 2022/23 (July-June) fiscal year.

Ruto became president after winning a closely contested election last month, with campaign pledges to create economic opportunities for the poor.

He faces a very narrow fiscal space to roll out his policies, after his predecessor Uhuru Kenyatta increased public borrowing to fund infrastructure projects.

The finance ministry has forecast economic growth of 5.5% this year compared with 7.5% in 2021, a continuation of recovery from the COVID-19 pandemic, which led to a contraction of 0.3 percent in 2020.

Sign Up for Our Newsletter Daily Update
Get the best of CNBC Africa sent straight to your inbox with breaking business news, insights and updates from experts across the continent.
Get this delivered to your inbox, and more info about about our products and services. By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.