It’s time for tough choices, CS says after dropping taxes proposals

Njuguna Ndung’u

Treasury Cabinet Secretary Prof Njuguna Ndung’u speaks on June 19, 2024, at KISM Towers in Nairobi.

Photo credit: Billy Ogada | Nation Media Group

What you need to know:

  • The CS said the government would not back down on directive to halt recruitment in civil service.
  • Prof Ndung'u also reiterated that the government's fiscal consolidation policy is on course.

The National Treasury now says the government will enforce more austerity measures in State-owned enterprises after dropping a number of tax proposals in the Finance Bill, 2024.

Treasury Cabinet Secretary Njuguna Ndung'u said on Wednesday the government was in a tight spot, and the proposed taxes were meant to manage the economy and help achieve development goals.

“We want the government to increase spending because we need schools, health facilities, roads and other infrastructure. We need to reduce the cost of doing business because that will increase profitability in the private sector. All these are positive. But when we say we are going to increase spending, the only way we can do that is through taxation or through borrowing,” Prof Njuguna said. 

While referring to the Finance Bill, 2024 and taxes introduced by the government, the CS ruled out the possibility of borrowing and took a swipe at those questioning the reduced development spending in the Sh3.92 trillion budget for 2024/2025.

Freeze recruitment

“We have a limit in terms of debt carrying capacity, we are already suffering from the burden. This is something I have talked about many times. Everybody resists high taxes, especially taxes on the final consumption goods. So you have to be very careful with what you are asking for, if you are asking for spending, you have to ask yourself how long can I spend because you have capacity constraints,” he added.

Prof Njuguna also said the government would not back down on its directive to freeze recruitment in the civil service and the directive to cut the budgets of State-owned enterprises by 30 percent.

“Hiring in the public sector will be based on need, not the other way around. We want to work like the private sector. The private sector hires people when there is a need. They do not have to operate to put resources aside waiting for a need to arise so that they can be deployed. It is a waste of resources,” he added.

The CS has also reiterated that the government's fiscal consolidation policy is on course.

Debt-bearing capacity

“Most people hear the term fiscal consolidation and they think it is only for the National Treasury, but it is for all of us. We have to create fiscal space, which unfortunately we don't have. We have to stop the accumulation of debt," Prof Ndung'u said.

"We have to increase our debt-bearing capacity and we have to make sure that we support production and not consumption, because that will give us more room. These are words coming from us because we understand the problems we are facing,” the CS added. 

He was speaking during the launch of the Public Procurement Regulatory Authority's (PPRA) strategic plan for 2023-2027 and its new offices in Nairobi on Wednesday.

PPRA Director-General Patrick Wanjuki said that the regulator has handled procurement disputes worth Sh750 billion.

The authority has urged Kenyans to report procurement disputes at PPRA’s new offices located along Ngong Road in Nairobi.