Highlights of the 2024/25 Budget Proposal Read by Treasury CS Njuguna Ndung’u

Treasury CS Prof Njuguna Ndung’u on Thursday, June 13, unveiled Kenya’s 2024/2025 budget totaling Ksh4.04 trillion. This budget, marked by significant allocations and stringent fiscal policies, reflects the administration's focus on economic growth, debt management, and social development.

Revenue and Deficit

The budget projects an ambitious revenue target of Ksh3.02 trillion, largely driven by tax reforms and improved revenue collection mechanisms. 

Despite these efforts, the budget deficit stands at Ksh720.1 billion, representing 4.1% of the GDP. The government plans to bridge this gap through strategic domestic and international borrowing and exploring alternative financing options such as climate financing and concessional loans​.  

Key Allocations

1. Education: Allocated Ksh657 billion, this sector remains a priority, emphasizing funding for free primary and secondary education, higher education loans, and vocational training.
2. Healthcare: Ksh159.1 billion has been earmarked for healthcare, including funding for universal health coverage and upgrading medical facilities across the country.
3. Infrastructure: Significant investments are planned for road construction, railway development, and energy projects, with Ksh418.5 billion set aside for these initiatives.
4. Social Protection: To address poverty and inequality, Ksh55.6 billion has been allocated for social protection programs, including cash transfers to vulnerable groups.

The budget includes several fiscal policies aimed at economic stabilisation and growth:

Also Read: Summary of Finance Bill 2024 and Its Impact on Your Pocket

Tax Reforms:

Enhanced tax measures are expected to increase revenue, with a focus on broadening the tax base and improving compliance.Below are some of the tax reforms proposed in the 2024/25 budget. 

1. Income Tax Measures

1. Annual Motor Vehicle Tax: An annual tax at a rate of 2.5% of the vehicle's value was introduced, with a minimum charge of Ksh5,000. The CS did not refer to the Ksh100,000 limit proposed in the Finance Bill of 2024. 
2. Tax-Free Allowances: The tax-free allowances for the private sector employees working out of station were increased from Ksh2,000 per day to a maximum of 5% of the employee’s monthly gross earnings.
3. Pension Benefits Tax Structure: The pension benefits tax structure was reviewed to be exempt-exempt-exempt (eee category).

2. Excise Duty Measures

1. Betting, Gaming, Lottery, and Prize Competition: Excise duty on these activities was increased from 12.5% to 20%.
2. Alcoholic Beverages: The duty on alcoholic beverages was restructured to be based on the centiliter of pure alcohol. The new rates are Ksh 22.50 for wines/beer and Ksh 16 for spirits.
3. Cigarettes: The excise duty rate on cigarettes was harmonized at Ksh4,100 per mille.
4. Liquid Nicotine: Excise duty on liquid nicotine was increased from Ksh70 to Ksh100 per milliliter.
5. Telecommunication Services: Excise duty on fees charged for telephone, internet data services, and money transfer services was increased from 15% to 20%, excluding money transfer fees charged by cellular mobile service providers.

3. Value Added Tax (VAT) Measures

1. VAT Registration Threshold: The VAT registration threshold was increased from Ksh5 million to Ksh8 million to account for inflation.
2. Input Tax Deduction: The VAT input tax deduction for taxpayers producing mixed supplies was limited to only input tax related to taxable supplies.

4. Miscellaneous Fees and Levies

1. Export and Investment Promotion Levy: The levy was reduced to between 10% and 3% from 17.5%, with an expanded list of products.
2. Eco-Levy: An eco-levy on specific products imported or produced locally was introduced.

The CS noted that these measures were aimed at enhancing tax compliance, broadening the tax base, and increasing revenue. 

The government aims to reduce public debt through strategic borrowing and exploring alternative financing options such as climate financing and concessional loans​. 

Expenditure Rationalisation

There is a strong emphasis on reducing wastage and corruption. CS Ndung’u outlined several measures to reduce wastage and ensure efficient use of resources:

1. Budget Cuts for Ministries and Agencies: A directive has been issued for a 10% reduction in the budgets of all ministries and state agencies to eliminate non-essential expenditures and focus on priority areas.
2. Auditing and Monitoring: Strengthened auditing and monitoring mechanisms will be put in place to ensure transparency and accountability in the use of public funds.
3. Elimination of Ghost Workers: Comprehensive payroll audits will be conducted to identify and remove ghost workers, ensuring that salary payments are made only to legitimate employees.
4. Procurement Reforms: The government will implement stringent procurement reforms to curb wastage and corruption, including the adoption of e-procurement systems to enhance efficiency and reduce opportunities for graft.
5. Energy and Utility Savings: Ministries and agencies will be encouraged to adopt energy-saving measures and reduce utility expenses through the use of renewable energy sources and more efficient technologies.

Economic Outlook

The budget outlines a positive economic outlook with expected GDP growth driven by increased investments in infrastructure, education, and healthcare. However, challenges such as high debt levels and global economic uncertainties remain.

Overall,CS Ndung'u said the 2024/25 budget aims to balance stimulating economic growth and maintaining fiscal discipline, ensuring sustainable development and improved living standards for Kenyans.