Kenya directs money to boost economy, jobs and firms
Wednesday February 10 2021
Pedestrians cross a road in Nairobi CBD on October 16, 2020. Kenya's 2021/2022 budget will focus on economic recovery. PHOTO | NMG
Kenya’s Cabinet Secretary for National Treasury Ukur Yatani is working on a spending plan for the 2021/2022 fiscal year with a focus on jump-starting an economy weighed down by the Covid-19 pandemic, declining revenue collection, growing expenditure needs, swelling debt levels and the rising political temperatures ahead of the referendum on the Building Bridges Initiative (BBI).
Mr Yatani through the 2021 Budget Policy Statement (BPS) said the focus of this year’s budget is to formulate policies aimed at providing an enabling environment for economic recovery to safeguard livelihoods, jobs, businesses and industrial recovery.
“The government will strengthen implementation of programmes and measures that ensure a more inclusive growth, foster macroeconomic stability, and avail liquidity to the private sector including initiating innovative products to boost credit to micro, small and medium enterprises,” he said.
“We have had to critically review our existing programmes and policies to ensure that they are not only consistent with our development agenda, but also informed by emerging realities brought about by the pandemic,” he added.
In 2020, the Kenyan economy was adversely affected by the lockdown measures to control Covid-19 infections, which disrupted livelihoods and nearly crippled businesses and economic activities.
As a result, the country’s economy is estimated to slow down to around 0.6 percent in 2020 from a growth of 5.4 percent in 2019 and further slow to 5.5 percent in 2022 partly due to the uncertainty associated with the 2022 general elections, however, it is projected to recover to 6.1 percent by 2024.
Risks
According to the draft BPS, risks to the projected economic growth will emanate from weaker external demand, reduced tourist arrivals and containment measures due the Covid-19 pandemic.
In addition, the economy will continue to be exposed to risks arising from public expenditure pressures, particularly wage related recurrent expenditures and the erratic weather related shocks that could have a negative impact on energy generation and agricultural output leading to higher inflation that could slow down growth.
According to the BPS Budget, execution in the first half of the 2020/2021 fiscal year was hampered by revenue shortfalls and rising expenditure pressures.
The shortfalls in revenues reflected the weak business environment and the impact of the tax reliefs implemented in April 2020 to support people and businesses from the adverse effect of the pandemic.
Revenue collection to December 2020 declined by 14 percent compared with a growth of 17.1 percent in December 2019 largely due to the difficult operating environment occasioned by the pandemic.
The cumulative total revenue — inclusive of Ministerial Appropriation in Aid (AiA) — amounted to Ksh800.1 billion ($7.34 billion) against a target of Ksh907.7 billion ($8.32 billion), with shortfalls recorded in both ordinary revenues Ksh75.8 billion ($695.41 million) and Ministerial AiA Ksh31.8 billion ($291.74 million).
Recurring expenditure
On the other hand, total expenditure and net lending for the period ending December 2020 amounted to Ksh1.19 trillion ($10.92 billion) which was below the projected amount by Ksh67.9 billion ($622.93 million).
Recurrent spending amounted to Ksh798.7 billion ($7.32 billion) while development expenditures amounted to Ksh262.8 billion ($2.41 billion).
Fiscal operations of the government by end of December 2020 resulted in an overall deficit, including grants of Ksh362.6 billion ($3.32 billion) against a projected deficit of Ksh371.8 billion ($3.41 billion).
This deficit was financed through net domestic borrowing of Ksh345.4 billion ($3.16 billion) and net foreign financing of Ksh17.2 billion ($157.79 million).
Kenya’s total debt as at September 30, 2020 stood at Ksh7.12 trillion ($65.32 billion).