How Mbadi intends to reduce Kenya's budget deficit, manage debts

National Treasury Cabinet Secretary John Mbadi has told the Senate that the government has adopted a multi-pronged approach to manage the prevailing fiscal deficit in the country.

Mbadi who was before the Senate plenary to answer questions said that strengthening financial controls through diverse borrowing, improving the debt repayment planning and promoting efficient resources allocation were some of the measures which will be deployed.

Responding to Nominated Senator Karen Nyamu who sought to know the medium-term strategy being carried out by the National Treasury to reduce the fiscal deficit from 4.9 per cent to a sustainable level, Mbadi said he would focus on revenue generation and sustainable expenditure control.

“For example, in the financial year 2025/26, given the projected expenditures and revenues, the fiscal deficit including grants is projected at Sh831.0 billion (4.3 percent of GDP) compared to the projected fiscal deficit of Sh862.7 billion (4.9 percent of GDP) in financial year 2024/25,” said Mbadi.

The CS told the Senate that the fiscal deficit in  financial year 2025/26 will be financed by a net external financing of Sh146.8 billion (0.8 percent of GDP) and a net domestic financing of Sh684.2 billion (3.6 percent of GDP).

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The Government, Mbadi said, was committed to implementing a fiscal consolidation plan targeting to reduce fiscal deficit to 4.3 percent of GDP in financial year 2025/26 and 2.7 percent of GDP over the medium term with this is designed to slow down accumulation of public debt, improve primary surplus thereby achieve fiscal sustainability.

“The government's fiscal policy places special emphasis on fiscal consolidation to reduce public debt vulnerabilities while providing fiscal space to deliver essential public goods and services with fiscal consolidation supported by concerted expenditure rationalization and revenue mobilization efforts bringing public debt on downwards,” said Mbadi.

He said that to strengthen expenditure control and improve efficiency and effectiveness in public spending, the government will: rationalise and reduce non-essential expenditure; roll out an end-to-end procurement system to maximise value for money and increase transparency in procurement; operationalise the  Public Investment Management Information System to automate public investment management process.

Mbadi said the government will also operationalise the Assets and Inventory Management Modules in the IFMIS for all Ministries and Departments since this will enable the Government to have full visibility of all assets and inventory and facilitate optimal assets utilisation and ensure idle assets are disposed in conformity with the existing legal requirements.  

Nairobi Senator Edwin Sifuna asked Mbadi what he was doing to address the existing taxation such as the housing levy, increase of PAYE and Value Added Tax on fuel that has led to increase of the costs of the various products in the country making life difficult for citizens.

Sifuna said that it was the Gen Z who has saved Kenyans from new taxes by instilling fear in the government but Mbadi denied stating that his position on taxation has always been not to overburden Kenyans through taxation.

“It is true that we have not made major changes in taxation that will overburden taxpayers by not having new taxes in the finance bill this year, however that cannot be exclusively said to be a Gen Z idea but a commitment the government made to reduce taxation so as not to overburden citizens,” said Mbadi.

He said that there is a discussion on how to restructure housing levy it since it has got some immense benefits to Kenyans with several projects coming up.

Kitui Senator Enoch Wambua sought to know what the National Treasury was doing regarding pension disbursement to former Members of Parliament who served between 1979 and 1992 and if any there are any adjustment to ensure they remain fair and sustainable, considering the rising cost of living and inflation over the years.

Mbadi said that the former legislators who served between 1979 and 1992 and were eligible for pension benefits have been receiving payments in line with the Parliamentary Pensions Act, Cap 196 (Revised 2012).

“This revision significantly enhanced their pension entitlements by adjusting the actuarial factor effectively doubling their pension benefits as a result' these former MPs received a revised pension lump sum and an adjusted monthly pension following the implementation of Section 8(2) of Cap 196 (Revised 2012),” said Mbadi.

He said that the Parliamentary Pensions (Amendment) (No. 2) Bill, 2019 sought to amend Section 8 of the Act to provide a minimum monthly pension of Sh100,000 for MPs who served between July 1, 1984 and January 1, 2001, however, the Bill lapsed in January 2019.

He also informed the house that the Parliamentary Pensions (Amendment) Bill, 2019 (No. 45 of 2019), which he sponsored while serving as Suba South MP was   rejected on September 24, 2020 following presidential reservations.

Mbadi further said that the Parliamentary Pensions (Amendment) Bill, 2023 (National Assembly Bills No. 15 of 2023), sponsored by Sirisia MP John Waluke which sought to implement the Sh100,000 as minimum pension faced opposition from key stakeholders.

“The National Treasury raised concerns about fiscal sustainability while the Salaries and Remuneration Commission deemed the proposal unconstitutional under Article 230(4)(a) of the Constitution, stating that pension reviews for state officers fall within its mandate while the Parliamentary Service Commission, recommended further consultations with stakeholders, ” said Mbadi.