Auditor General flags Sh170 billion revenue shortfall for FY 2023/2024
The government realised Sh2.29 trillion in ordinary revenue compared to a projected Sh2.46 trillion, leaving a deficit of 6.9 per cent.
Auditor General Nancy Gathungu has placed the National Treasury under fresh scrutiny after Kenya missed its revenue collection target by Sh170.39 billion in the 2023/2024 financial year, the sharpest miss in half a decade.
Her review showed that the government realised Sh2.29 trillion in ordinary revenue compared to a projected Sh2.46 trillion, leaving a deficit of 6.9 per cent.
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The Auditor General said the wide gap calls into question the reliability of revenue forecasts prepared by the Treasury.
“This trend raises some concern on the accuracy of revenue projections in the budget, although the variations are below 10 per cent,” Gathungu noted in a report submitted to the National Assembly Select Committee on Budget and Appropriations covering the 2025/2026 estimates.
The country’s revenue record has fluctuated widely in recent years. In 2019/2020, there was a shortfall of Sh50.9 billion, equivalent to three per cent, which drastically narrowed the following year to Sh581.59 million, or 0.04 per cent.
In 2021/2022, Kenya recorded a rare surplus of Sh101.49 billion, representing 5.5 per cent, but this was reversed in 2022/2023 when the shortfall stood at Sh99.34 billion, or 4.6 per cent.
Gathungu also expressed concern over the mounting tax arrears reported by the Kenya Revenue Authority (KRA).
As of June 30, 2024, outstanding tax obligations had risen to Sh2.33 trillion, more than double the Sh999.6 billion reported the previous year.
The arrears, according to the report, come from compliance checks, tax audits, defaulted payments, unremitted deductions, and balances from annual returns. Of this, Sh2.06 trillion was linked to the 2023/2024 financial year alone.
“The amount of Sh2.065 trillion relating to the financial year 2023/2024 is equivalent to 91.8 per cent of the total Treasury recurrent revenue collections of Sh2.250 trillion for the same period, an indication that the set targets for revenue by the authority are way below the possible tax yield,” Gathungu said.
She warned that the persistent underperformance and swelling tax arrears highlight a looming fiscal problem, pointing to the possibility that budget goals will continue to be missed.
“The annual revenue shortfalls and high tax arrears indicate a potential fiscal challenge, as revenue generation will most likely not meet initial expectations or budget projections. They are also indicators of inadequate revenue planning and forecasting,” she cautioned.
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