Treasury axes MPs’ controversial Sh7bn budget raise

The National Treasury has blocked an attempt by MPs to increase their budget allocation by Sh7 billion for the upcoming financial year as the government moves to enforce stricter fiscal discipline.

While the Treasury's original Budget Policy Statement had proposed Sh42.4 billion for Parliament, lawmakers had unilaterally approved a higher figure of Sh49.4 billion during their review of the document.

The CS John Mbadi-led National Treasury has reversed the self-awarded increase, citing budget constraints and the need to maintain Kenya's fiscal targets.

In their revised version of the budget, MPs had also allocated Sh26.7 billion to the Judiciary and Sh2.44 trillion to the Executive, forming part of  a Sh2.57 trillion national government budget.

The legislators additionally set aside Sh405 billion for county governments and Sh3 billion for public participation initiatives, intending the figures to guide spending limits for fiscal year starting July 1.

However, these increases have been largely rejected in the Treasury's final budget estimates for 2025-26.

 Mbadi in a brief to the National Assembly, explained that the additional funding approved by Parliament could not be accommodated within the current fiscal framework.

He cited the Cabinet's directive to maintain the budget deficit at 4.5 per cent of Gross Domestic Product as the primary reason for the spending cuts.

As a result, the Executive's allocation has been reduced by Sh18.8 billion to Sh2.42 trillion, while Parliament's budget has been maintained at the original Sh42.5 billion proposal rather than the increased Sh49.4 billion that lawmakers had sought.

The Judiciary saw a minor reduction of Sh87 million from its proposed allocation, settling at Sh26.6 billion.

The National Government Constituency Development Fund (NG-CDF) was allocated Sh58.8 billion, which the Treasury noted complies with the legal requirement that it not exceed 2.5 per cent of ordinary revenue.

The Sh3 billion originally earmarked for public participation initiatives has been slashed to just Sh2.5 billion in the final budget.

This standoff tells of the growing tension between parliamentary spending ambitions and the government's need to maintain fiscal discipline.

With the lawmakers having the final say on the estimates, it remains to be seen if they would defy the Executive and push through their desired allocations.

Even so, Kenya’s Parliament is touted as one of the best funded despite the tough economic times that has constrained government spending.

The substantial public debt burden – Sh11 trillion, and commitments to international lenders have forced tough choices in budget allocations.

President William Ruto has instilled far-reaching austerity measures, with the government aiming to control expenditures across all sectors.

Treasury says it aims to reduce the annual growth in public debt and “implement a robust liability management strategy.”

 Mbadi said while at it, the government is keen on striking a balance to ensure ‘service delivery to citizens remains unaffected’.

 “The goal is to enhance the country’s debt position,” the Treasury boss said, adding that the situation would be reversed if more revenue is netted.

Besides MPs, the Treasury also instigated substantial expenditure cuts affecting multiple sectors and top offices.

President William Ruto and his deputy Kithure Kindiki’s offices lost a combined Sh800 million compared with last year’s budget allocations.

Treasury also slashed retirement perks for former president Uhuru Kenyatta, former Prime Minister Raila Odinga, and ex-VP Kalonzo Musyoka.

National Police Service and the Basic Education department got reductions of Sh9 billion each, while the Treasury is set to lose Sh8 billion.

Cabinet approved cuts amounting to Sh100 billion “to create the fiscal space necessary to deliver essential public goods and services.”

INSTANT ANALYSIS

With economic growth still fragile and debt levels high, the Treasury's actions demonstrate the difficult choices required to keep the country's finances on a sustainable path. As the budget process moves forward, the focus will remain on how these fiscal constraints affect service delivery and development projects.