Job cuts loom as Ruto now targets State-owned firms to fund Sh4tr budget
Business
By
Brian Ngugi
| Mar 27, 2024
President William Ruto's cash-strapped administration plans to raid cash-rich parastatals for additional billions from levies and fees to fund his second full-year budget, which is set to cross the Sh4 trillion mark for the first time.
The radical move could lead to a fresh round of job losses, according to parastatal bosses and union leaders who spoke to The Standard on condition of anonymity yesterday.
Speaking to chairs and chief executive officers (CEOs) of State corporations at State House Nairobi on Tuesday morning, the President revealed his administration would also merge the functions of some agencies, citing duplication of roles.
He also directed the CEOs to reduce their recurrent budgets by 30 per cent in what could signal a fresh round of job cuts at some of the key agencies.
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Additionally, commercial State corporations will, according to the President, from now on be required to remit 80 per cent of their profits after tax to the National Treasury.
"We will give you directions on what to do with the remaining 20 per cent," the President said according to a Presidential dispatch.
The move comes as the President seeks tighter control of the massive bureaucracy of the parastatals.
The International Monetary Fund (IMF) has been piling pressure on Kenya to reduce the wage bill of some struggling state-owned agencies maintaining they are draining and harming the economy.
President Ruto's Kenya Kwanza administration has drawn up a Sh4.2 trillion expenditure plan for the 2024/25 financial year, according to official documents.
However, a controversial revenue plan proposed by President Ruto has not yet gained traction as tax collection in both the previous and current fiscal years has fallen short of the target by billions of shillings.
This deals a major blow to the President's efforts to fund his costly campaign promises and repay mounting public debt at a time when his administration's additional taxes are stoking tensions amid the high cost of living.
KRA faces significant pressure from the Ruto administration to address revenue leakage and enhance the State's financial resources, to allow the Treasury to reduce its dependence on public debt.
This comes at a time when the Kenya Kwanza government has shown a strong interest in implementing new tax increases rattling its support base.
The Ruto government has implemented a set of contentious taxes, including a 100 per cent increase in value-added tax on fuel to 16 per cent, and the implementation of a 1.5 per cent surcharge to finance the construction of affordable housing.
The government anticipates that these measures will generate an additional Sh200 billion annually.
The taxman has been missing its targets dealing a blow to the government's revenue and development plans.
Some insiders said regulatory agencies will tighten the noose on Kenyans at a time when the Government is facing several revenue-raising challenges.
The Kenya Kwanza government has been relying on a series of fresh levies and revenue modifications aimed at the sector in a bid to increase its tax earnings twofold.
The President ordered regulatory institutions to remit 90 per cent of their surplus funds to the Treasury.
Such include cash-rich agencies such as the Communication Authority of Kenya (CA), Competition Authority of Kenya (CAK), National Environmental Management Authority (NEMA), and Tea Board of Kenya among others.
"There will be no exceptions. Everybody must comply," President Ruto directed.
The President directed that the government, including State corporations, must live within its means.
Consequently, expenditure must never exceed revenues collected.
The Ruto Government is separately planning the sale of the troubled agencies to improve their performance and fill the State's coffers amid high levels of public debt.
The move to reduce expenditure, Ruto explained, will stop unnecessary borrowing and accelerate the government's transformation agenda.
"We must get it right. We must do what is right. This is the time," he added.