This is true even though Kenya has fallen short of certain of its revenue goals.
The promise of an expected rise in tax income serves as the foundation for the National Treasury’s proposal.
The National Treasury of Kenya wants to increase government spending by 15.9% percent to Ksh3.66 trillion (about $29.2 billion) in the upcoming fiscal year in order to account for anticipated increases in tax collections. The most recent data indicates that the Kenya Revenue Authority (KRA) needs to catch up to current goals.
The draft medium-term national Budget Policy Statement issued this past week shows the government’s intention to increase the budget to $40.5 billion by 2026, which is supported by anticipated stable rise in tax collections.
A 15% rise in revenue to $23 billion is predicted by the Treasury for the next year, and at least a $33.4 billion increase by 2026. This gain is mostly attributable to anticipated increases in tax collection and a modest improvement in assistance appropriations.
The statement says, in part, that “ongoing tax policy reforms and revenue administration measures focused on broadening the tax base will serve as the foundation for revenue performance.”
The Kenyan Treasury asserts that it intends to lower the fiscal deficit from $6.6 billion (5.7% of GDP) in 2022–2023 to $5.7 billion (4.4% of GDP) in the next fiscal year, and even further to about 3.6% of GDP by 2026 as the nation’s output increases.
In addition to a trend toward local borrowing and loans with advantageous terms rather than foreign loans, whose servicing costs have lately increased, this is expected to have an ongoing negative impact on debt financing.
Yet, meeting expectations for tax income and treasury securities has grown more challenging, raising concerns about the feasibility of the objectives set for the upcoming fiscal year and the longer term.
According to data from the National Treasury, the Kenyan Revenue Authority’s first-half revenue total of $7.8 billion (Ksh985 billion) fell short of the target by about $342 million.
Despite this, the newly proposed supplementary budget was upgraded, and the time period’s income projections were set at $20.1 billion. This suggests that KRA would need to raise nearly twice as much cash in the future months as it did in the first half of the year.
