A Look At 2020/2021 Budget Estimates: Do Numbers Make Sense?

The budget estimates for 2020/2021 are out but do numbers make sense? Are the current estimates in the budget overambitious? Is the government determined to continue driving on the wheels of debts?

With the current pandemic sweeping across the country and hurting the economy, the current budget looks like a white elephant that makes no sense and one that will come to haunt the National Treasury.

The current budget is anchored on a GDP growth estimate of 4.2 percent of 2020/2021 based on a growth projection of 2.5 percent in 2020. It is also based on the approximate growth projection of 5.8 percent in 2021.

The Central Bank of Kenya estimated that the GDP for 2020 will drop to below two percent. The World Bank and the International Monetary Fund (IMF) have also predicted doom for the Kenyan economy in 2020.

The numbers quoted will only be achieved if the government is going to sink deeper into borrowing both Internationally and domestically, a move that will most definitely balloon the debt ceiling.

The total budget has been estimated at 2.73 trillion shillings. This included the total expenditure and net lending for the 2020/2021 financial year.

The lion’s share of the current budget will go to current expenditure. Current expenditure will swallow a whopping 1.81 trillion shillings for the financial year.

READ: National Treasury Disburses 40 Billion Shillings To Fight Covid-19

Expenditure on developments, including those funded by foreigners, as well as funds availed for the counties is estimated at 584.9 billion shillings.

The National Treasury is also planning to set aside a total of 57.74 billion shillings for the post-Covid-19 economic stimulus program. The funds are expected to revive the economy and shield it against the shocks of Covid-19.

The Kenya Revenue Authority (KRA) says that revenue for the year will drop to 1.62 trillion shillings due to a drop in tax receipts and reduced business activities.

KRA also says revenue collection was hit by the decision by President Uhuru Kenyatta to reduce corporate tax from 30 percent to 25 percent, and Value Added Tax (VAT) from 16 percent to 14 percent.

The current budget estimate is pure rhetoric. It fails to capture the real impact of Covid-19 on the economy. The proposal and allocation of funds are as before (traditionally), allocating to governments and agencies.

The budget does not categorically state how the health sector and the businesses will be made strong or helped to take off (for SMEs that have collapsed) as a result of Covid-19.

The expectations in revenue drop mean that the Jubilee government is planning to borrow massively to finance the budget. But for what purpose? Where is the common man in that budget?

READ: The Impact Of COVID-19 On Kenya’s Real Estate Sector