Consolidating gains for a prosperous Kenya was the main theme for the 2016/2017 Kenyan budget estimates as tabled by Henry Rotich, the Kenyan Cabinet Secretary for the National Treasury with a national optimism that it holds the secret for one moving from poverty, deprivation, low income, low business returns in to wealth now that we are in a devolved system of governance.
The CS presented a Budget Estimate for the Financial Year 2015/2016 of Ksh2.234 Trillion shillings to finance its programmes and activities starting July 1.
His theme was, “Enhancing economic transformation for a shared prosperity”, thus, to achieve the end he said they were focusing on: addressing security challenges to enhance a friendly business environment, scaling up infrastructure investments as the building blocks needed to achieve a more lasting and stable growth; and initiatives to drive agricultural and industrial transformation making growth and development more inclusive and equitable across counties by investing in the Kenyan people.
The CS presented an estimated Kshs 2.3trillion 2015/16 fiscal year budget, with recurrent expenditure at Kshs 850.3 billion and development expenditure at Kshs 809.0billion, representing 11.5percent and 10.9 percent of the GDP.
Currently, Kenya is thriving under an inflation rate of 5.0 percent as recorded in May from 5.3 per cent recorded in April, an eased Central Bank’s Monetary Policy of 10.5 per cent and a Gross Domestic Product of 5.6 percent in 2015.
Treasury projects a GDP forecast for 2016 at 5.9 percent. For 2017 and 2018 forecast is 6.1 percent and 6.2 percent respectively.
“Growth is expected to remain robust supported by ongoing infrastructure investment, private consumption and agriculture.”
However, Kenyans were keen to know if the budget would address inflation, infrastructure, education, agriculture, health, industry, income security among the haves and have-nots ahead of the General Elections scheduled for August 2017.
The World Bank says Kenya’s debt levels have increased by 5 percentage points on average attributed to rising infrastructure spending that should support potential growth over the medium term.
Other financial analysts have indicated a decline in the recurrent expenditure to 11.5 percent of GDP from 12.2 percent in 2015/16, an indication that the government is focusing on cutting down the portion of expenditure. Development expenditure is expected to support ongoing infrastructure projects in roads, the Standard Gauge Railway, ports, energy and security.
John Kinuthia and Jason Lakin from the International Budget Partnership state that budget has shifted more resources toward infrastructure, water and governance, and reducing resources for education and public administration.
“The Energy, Infrastructure and ICT sector’s share of the budget has increased by 4 percentage points, growing from 26.9 percent to 30.4 percent, the largest increase for any sector.”
However,” The Education sector is the second largest expenditure sector and is allocated one fifth of the total MDAs budget. Here again, a reorganization rather than a change in priorities (in this case the shift of the laptop budget to ICT) has caused most of the reduction in the share of the budget for Education, which is going down by 2 percentage points between 2015/16 and 2016/17.”
Granted by the levels of poverty in Kenya, it is a tragedy that the country cannot raise its development budget allocations beyond the 50 percent threshold. A raise in the development budget for project implementation will generate significant employment opportunities with a high impact on poverty reduction, especially those that encourage equity and employment creation.
“Our target to generate 1 million new jobs remains.In 2016, we target to grow by 6.0 percent and by 7.0 percent in the medium term,” Rotich said.
“Our economy generated 841,600 new jobs, up from 799,000 in 2014, according to the latest Economic Survey released by the Kenya National Bureau of Statistics.”
Huge financing gap
To fund the budget, treasury plans to raise Kshs 1.37 trillion from domestic tax collection which shall be achieved by broadening the tax base and improving revenue administration through simplified and modernized VAT legislation. “If everybody paid their fair share of taxes we would be in a better position to lower tax rates. As part of the review of income tax, we are considering to introduce presumptive tax for the hard to tax segment of our people, including those in the informal sector,” the CS noted.
Treasury projects a budget deficit amounting to Ksh398.1billion with an aim of bringing it below 4 percent of the GDP. This deficit is expected to be funded by domestic borrowing amounting to Ksh223 Billion and external borrowing of Ksh 4 billion; with Kshs 1.5 trillion being generated by the Kenya Revenue Authority with a consulting firm being attached to it to make sure 2016/17 FY targets are met according to the CS.
“Ksh5 billion has been allocated to cater for unforeseen expenditures. The 2016/2017 expenditure creates a gap of Ksh 691.5 billion, but I assure you Kenya’s debt remains sustainable. The debt is focused on development to benefit Kenyans,” he said.”We remain committed to bringing the fiscal deficit down gradually to below 4 percent of GDP in the medium term,” He added.
The Treasurer aims to achieve this by ensuring there is domestic resource mobilization. Broadening the tax base, and improving tax administration by reviewing the Kenya Revenue Authority organization. He aims to use this to provide an equitable taxation that would have a positive impact on governance. He also intends to enforce capital gains tax to boost revenue, “We have adopted a modern VAT legislation which is being implemented now. We propose to enhance our tax collection to Ksh1.5 Trillion”.
He added, “Kenyans are very loud on eliminating corruption and wastage.”
Treasury said that efforts of combating corruption in the public sector have been enhanced with the role out of the e-procurement tendering process through the Integrated Financial Management information System (IFMIS) which will promote transparency and accountability in utilizing of public funds.
“We have mandated that all public finance officers to serve a maximum of 3 years. And all procurement officers will undergo fresh vetting,” he said. To minimize corruption cases witnessed within the counties, he said, “We have issued a notice to all public service entities, 47 county governments to establish internal audit committees beginning 1st July 2016.”
The budget estimates will now be reviewed by the Budget and Appropriations Committee and then by the National Assembly for amendment and approval before June 30.