Kenya to cut budget to $29 billion

Wednesday September 19 2018

Treasury Cabinet Secretary Henry Rotich

National Treasury Cabinet Secretary Henry Rotich on his way to Parliament to present the 2018/2019 budget statement on June 14, 2018. PHOTO | SALATON NJAU | NATION MEDIA GROUP 

By DAILY NATION
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The Kenyan government has proposed to slash its Ksh3.026 trillion ($30 billion) budget for the current financial year by Ksh55 billion ($55 million), a move that will affect key sectors of the economy. 

The reduction is contained in the supplementary budget estimates prepared by National Treasury Cabinet Secretary Henry Rotich and tabled during a special sitting of the National Assembly on Tuesday.

If adopted by the MPs on Thursday - during a second special sitting, the budget will reduce to Ksh2.971 trillion ($29.7 billion) as the government fights to bridge a huge deficit because it is only able to raise about Ksh1.6 trillion ($16 billion).

The proposed cuts will be considered on Wednesday by the Budget and Appropriations Committee, before the report is tabled in the House on Thursday.

Losers

Some of the biggest losers are the Devolution ministry (Ksh6 billion; $60m), National Treasury (Ksh6 billion; $60m), the Information and Communication Technology ministry (Ksh5.9 billion; $59m) and the Energy docket (Ksh2.6 billion; $26m).

The Infrastructure ministry is set to lose Ksh8.7 billion ($87m) while the Foreign Affairs ministry will lose Ksh179.5 million ($1.8m).

The Ksh36 billion ($360 million) allocated to Parliament will also reduce by Ksh5 billion ($50 million) while the National Lands Commission (NLC) will lose Ksh50.4 million ($0.5m).

The education sector was not left behind. The Vocational and Technical Training has had its budget slashed by Ksh1.3 billion ($13m), University Education and Research by Ksh1.07 billion ($10.7m), Early Learning and Basic Education by Ksh487.3 million ($4.8m) and the Teachers Service Commission (TSC) by Ksh67.7 million ($0.67m).

Mr Rotich said in his statement to the MPs that the government has to make prudent policy decisions so that unwarranted debt burden is not imposed on future generations.

“Over the medium term, the national government’s borrowing shall be used only for the purposes of financing development expenditure and not for recurrent expenditure,” he said, despite accusations by critics over the spiralling corruption in the public institutions.

Survivors

As the other sectors suffered cuts, the Ksh32 billion ($320m) allocated to the National Intelligence Service (NIS) remained intact and so was the case with Ksh2.9 billion ($29m) for the Ethics and Anti-Corruption Commission( EACC).

The Auditor General’s office lost Ksh110 million ($1.1m) and the Controller of Budget Ksh15 million ($150,000).

The cuts are on the backdrop of difficulties by the country to meet its financial obligations, with its foreign debt surpassing the Ksh5.1 trillion

($51b) mark as at June 30, 2017.

In a bid to cure the growing debt, the International Monetary Fund (IMF) has proposed a slowdown on the borrowing appetite and a funding of the budget from within, a move that brought on the 16 per cent Value Added Tax (VAT) on fuel products.

President Uhuru Kenyatta want the tax rate halved.

Though the IMF move has been opposed by Kenyans and political leaders, President Kenyatta recently said there are no option so Kenyans must persevere to gain in future.

A section of MPs are, however, apprehensive that the gains may never be realised with increased looting of public resources. 

Interestingly, the Housing docket lost Ksh80 million ($0.8m) despite being part of the president's Big Four Agenda for affordable housing for Kenyans as he leaves office in 2022.

Development

Mr Rotich has promised to ensure that up to 30 per cent of the national budget is allocated to development.

He said that all internal and external borrowing will be restricted to the funding of development projects.

Compensation of employees – benefits and allowances – will now be restricted to 35 per cent of the national budget.

“We have made adjustments to the programmes and votes as a result of amendments to the Finance Bill, 2018. Some of the adjustments exceed 10 per cent. We are, in this regard, requesting special approval of the expenditure adjustments,” he said.

According to the CS, going forward, the government will  come up with measures to realise the 35 per cent threshold provided for in Section 26 (1) (a) of the Public Finance Management Regulations, 2015.

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