The Treasury has cut development spending by Sh30 billion for the current financial year through a mini-budget in what could dim economic growth and jobs creation.
The mini-budget, which was tabled in Parliament yesterday, indicates that project spending will drop from the initial budget of Sh642 billion to Sh612 billion.
This looks set to affect plans such as roads, water, power plants, real estate projects and electricity transmission, the supplementary budget shows.
The cut in spending comes as Kenya races to rein in a ballooning budget deficit and appetite for borrowing amid missed revenue targets.
The government’s revenue collection for the fiscal year starting July was behind target by Sh29 billion with the Treasury blaming it on the prolonged electioneering period.
Adding to the squeeze, the IEBC has requested Sh12 billion for the presidential election re-run, but the Cabinet has approved Sh10 billion for the repeat poll.
This has formed budget cuts, with officials not allowed to travel outside the country without clearance from the president while domestic travel will also be reviewed.
The government remains the biggest buyer of goods and services and reduced spending has an effect on economic growth which has been downgrade to 5.5 per cent from the initial forecase 5.9 per cent. State spending puts money in private hands through demand for raw materials, which ultimately creates new jobs.
Cement makers, steel manufacturers, contractors and the thousands of workers employed in infrastructure projects benefit from public spending and are likely to feel the pinch of the budget cuts.
The Treasury earlier noted that the execution of development projects by ministries had been slow.
Low absorption has been a concern for the government with an estimated 20 per cent of the development budget returned to the exchequer at the end of each financial year unspent.