The National Treasury overshot its recurrent spending target in six months to December 2024 by Sh101.3 billion to Sh1.4 trillion, from a target of Sh1.299 trillion on higher-than-expected spending on domestic debt service and pensions.
The overshooting of the recurrent budget in the first half of the 2024/25 fiscal year came as the exchequer saw dwindling revenues as overall collections fell shy of the target by Sh93.2 billion in the same period.
Domestic interest payments in the six months were Sh58.3 billion above target at Sh421.8 billion from an estimate of Sh363.4 billion.
Spending on pensions and other consolidated fund services items which include salaries to constitutional offices, was meanwhile Sh22.1 billion above board at Sh104.6 billion against a target of Sh82.4 billion.
Contributions by the government to civil servants’ pension also overshot the Sh14.2 billion target, coming in at Sh16.1 billion over the six months.
The National Treasury has attributed the above target expenditures to the under estimation of the spending requirement on the items.
“Recurrent expenditure for the national government amounted to Sh1.4 trillion against a target of Sh1.299 trillion, implying that expenditures were above the set target by Sh101.4 billion,” the exchequer says in the latest quarterly and budget review report.
“The above target expenditure...was due to higher than targeted expenditures on pension payments, domestic interest payment and operation and maintenance.”
The overshooting of the expenditures amid dwindling revenues is expected to pile pressure on the exchequer to fund the full year budget as collections remain weak in a soft economy.
The above target expenditures on domestic interest payments are however against declining interest rates on government securities, with domestic interest rates having receded on Central Bank of Kenya (CBK) benchmark rate cuts, which is indicative of a future decline in domestic interest costs.
The 91-day Treasury bill for instance declined to average 10.3 percent in December 2024, compared to a higher 15.7 percent in December 2023.
Pension payments have on the other hand grown as the Treasury races to reduce the backlog from the previous fiscal year.
Additional data from the Pension Department showed the exchequer processed Sh82.8 billion in pension claims in six months to December from Sh59 billion a year earlier.
The government has been struggling to disburse pension funds due to shortfalls in revenue, deepening the economic hardship for retirees, some of whom have died without accessing their benefits. The exchequer carried over Sh23.78 billion in pension claims due in the financial year to June 2024, citing a revenue shortfall.
Development expenditures also overshot the target by Sh27.4 billion to Sh271.9 billion against a Sh244.5 billion target on higher spending on development projects.
The overall overshoot in expenditures saw the fiscal balance register a higher deficit of Sh526 billion or three percent of Gross Domestic Product (GDP) from a gap of Sh391.5 billion or 2.4 percent of GDP previously. The wider deficit implies that the exchequer is likely to turn to more borrowing to fully finance the budget as revenue collection underperforms the target.
