Economist Criticizes Mbadi’s Budget Proposal

Chadda urges government to address key issues in the Draft 2025 Budget Policy Statement, warning against fiscal risks

Renowned economist has raised concerns over Treasury’s 2025 budget proposal, urging the government to review the Draft 2025 Budget Policy Statement for the fiscal years 2025/26 to 2027/28.

In a letter addressed to Treasury Cabinet Secretary John Mbadi, Chadda highlighted five key areas that he believes require urgent attention and revision.

Chadda’s concerns primarily center on public participation and budget transparency, the declining GDP growth, government expenditure, the current account deficit and exchange rate policy, and the implementation of accrual accounting alongside zero-based budgeting.

One of Chadda’s most significant criticisms was the apparent lack of public input in the budget formulation process.

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Despite legal requirements mandating public participation before the submission of the Budget Policy Statement, Chadda pointed out that it was widely acknowledged that public feedback was not adequately integrated into the final draft.

He emphasized that good governance practices would dictate a stronger commitment to involving the public in the decision-making process.

“Indeed, as good governance would dictate, the Treasury is required to have public participation prior to submitting the Budget Policy Statement for approval,” Chadda wrote.

“However, it is public knowledge that the views of the public are not really incorporated into the Budget Policy Statement.”

Additionally, Chadda questioned the Treasury’s optimistic projections of a sharp increase in GDP growth for 2025.
While the government anticipates a recovery, recent data from previous quarters suggests a concerning trend of declining economic growth. Chadda cited the GDP growth rate’s drop from 5.5 per cent in Q1 2023 to 4.0 per cent in Q3 2024, attributing this decline to several factors, including rising government spending.

“The decreasing GDP growth rates signal a pressing issue,” Chadda noted, explaining that the increase in government expenditure, coupled with rising taxes, was putting undue pressure on the economy.

He warned that continued fiscal expansion could hamper economic stability and burden taxpayers even further.
The economist also raised alarms over the proposed sharp increase in government expenditure, which is expected to rise by over Sh1 trillion from 2023 to 2026.

This fiscal framework, which outlines a substantial jump in both revenue and expenses, has sparked concerns about its sustainability.

While additional revenues are expected to be generated through new tax measures, Chadda cautioned that these changes could harm an already strained economy and exacerbate the tax burden on citizens.

Despite the Treasury’s optimistic outlook, Chadda emphasized that the status quo, if maintained, could risk undoing the economic progress made in recent years, including stabilizing the Kenyan shilling against the US dollar.

As the government prepares for final approval of the budget, Chadda’s call for a more comprehensive review and a stronger focus on public participation and fiscal prudence highlights the ongoing challenges facing Kenya’s economy.

Whether the Treasury will heed these concerns remains to be seen as the country navigates a complex fiscal landscape.