National Treasury to Present 2.3 Trillion FY 2016/17 Budget

The Cabinet Secretary of the National Treasury Henry Rotich will on Wednesday, table before the National Assembly Kenya’s KES2.3 Trillion budget estimates for the fiscal year 2016/2017.

In the FY2015/2016 it had planned a gross spending of KSH 2.26 trillion. The theme of the budget is, “Sustaining prosperity in a volatile global economy”.

Cytonn Investments, says the budget will be 11.2 percent higher from Kshs 2.0 trillion in 2015/2016 premised on an expected economic growth rate of 6 per cent in 2016 from an estimated 5.6 percent in 2015.

The total budget is estimated at Kshs 2.3trillion, 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 according to Cytonn investments.

According to the budget estimates, treasury targets a revenue collection of KSh1.49 billion up from Sh1.29 billion in the last financial year.

 International Budget Organisation says the Budget Policy Statement (BPS) tabled in Parliament besides the expected revenue to be generated, will leave a deficit of roughly Ksh 555.4 billion, 6 percent smaller than the revised 2015/16 budgeted deficit.

Treasury expects the deficit to be funded by domestic borrowing of Kshs 229.6 billion and external borrowing of Kshs 459.4 billion.

Cytonn notes that the budget will be funded by Kshs 1.4 trillion from domestic tax collection, 18.6 percent of GDP, an increment which shall be achieved by broadening the tax base and improving revenue administration through simplified and modernized VAT legislation.

To addressing revenue shortfalls Cytonn says the treasury will have to put in place initiatives broadening the tax base for example having passed the Excise Duty Act, sealing the loopholes in KRA collections through digitization of processes (i-TAX), and restructuring of the KRA processes on revenue administration.

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However, PKF East Africa, business analysts on Monday during a pre-budget session in Nairobi, the government was urged to clarify inconsistencies in the Tax Procedure Act 2015 which makes it ineffective to ease compliance and increase revenues.

“The Tax Procedure Act sought to consolidate provisions relating to the tax administration contained in the current tax legislations, but the provisions relating to administration of WHVAT and appointment of agents deleted from the VAT Act, 2013 have not be addressed,” said PKF Eastern Africa CEO Atul Shah.

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PKF further urged National Treasury Cabinet secretary Henry Rotich to table a new income tax Bill in Parliament to overhaul the current Income Tax Act which was enacted in 1974. Shah said the Act has some drafting errors that need to be corrected so as to serve effectively, adding that many things have changed since it was launched.

According to the estimates, the treasury has prioritized more spending on education, health, and Social protection areas.

In the education sector, Sh13.4 billion has been proposed for the deployment of laptops to schools, development of digital content, building capacity of teachers and rolling out computer laboratory for primary schools throughout the country.

In the food security and agriculture cluster, Sh12.2bn has been allocated for the on-going irrigation projects country and transformation of agriculture from subsistence to productive commercial farming.

The National Treasury plans to allocate Sh32 billion for Free Day Secondary Education and Sh14 billion for Free Primary Education. Sh400 billion will go towards distribution of sanitary towels for girls in schools.

Parliament has been allocated Sh24.6 billion, the Judiciary Sh15.3 billon while Sh228.5 billion has been allocated to constitutional commissions.

The National Government Constituency Fund has been allocated Sh34.5 billion while Sh6 billion has been set aside for the Equalization Fund.

With a positive economic growth witnessed in 2015 at 5.6 percent attributed to good weather that helped boost the agriculture sector, the ministry projects a 6.0 per cent growth in 2016.

“Going forward, we project the economy will expand further to 6.0 percent in 2016 from 5.6 percent in 2015 and 6.5 percent in the medium. This growth will be supported by strong output in agriculture with a stable weather outlook and completion of key public projects in roads, rail and energy generation. In addition, strong consumer demand and private sector investment as well as stable macroeconomic environment will help reinforce this growth,” according to the policy statement.