President William Ruto has said the government should not borrow money to finance recurrent expenditures.

Ruto said that on Thursday during the opening of the thirteenth parliament.

During the address, Ruto noted the country’s financial situation is not in a good place and for growth to be realised, Kenya needs to invest at least 25 per cent of its GDP.

“I have news, and it is not very good news. Our financial situation is not very good,” Ruto said.

“For Kenya to grow to an upper middle-income country, we need to invest at least 25 per cent of our GDP. Our current national savings rate is below 10 per cent of our GDP which translates to an investment-savings deficit of 15 per cent of GDP.”

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The Head of State disclosed that Kenya has sought to close this gap with public borrowing over the last decade and in 2022 alone, the government budgeted to borrow Sh900 billion to finance both development and recurrent expenditure. 

Ruto said that was not right as the government should not borrow to finance recurrent expenditures.

“The Government should never borrow to finance recurrent expenditure. This is not right, prudent or sustainable, it is simply wrong. We must bring ourselves back to sanity,” the president said.

The head of State warned that the country must revert to the arrangement where the government contributes to the national savings by restricting recurrent expenditure below revenue.

Ruto said he has instructed the National treasury to work with ministries to find Sh300 billion in the 2022 budget and the same will be reduced annually until the goal is achieved.

“Over the next three years, we must reverse this and go back to the situation where government contributes to the national savings effort by keeping recurrent expenditure below revenue,” Ruto said.

To this end, I have instructed National Treasury to work with ministries to find savings of Sh300 billion in this year's budget. Next year, we will bring it further down so that, by the third year, we have a recurrent budget surplus.”