People Daily

Why Budget has hit the Sh3 trillion mark

Fred Aminga @faminga

Parliament has approved a Sh400 billion increase in the 2018/19 national budget from Sh2.627 trillion in the current financial year.

The increase, which is mostly pegged on government’s Big Four development agenda, is expected to drive growth in manufacturing and housing sectors while deepening food security and enhancing healthcare in what is expected to  stimulate growth and create more jobs.

Already, the government has set aside Sh97.3 million, which it intends to ring-fence before the budget is read on Thursday to ensure the agenda is on track.

The challenge for Treasury Cabinet secretary Henry Rotich will be to fast track a smooth continuation leveraging on his last year’s budget under the theme “Creating Jobs, Delivering a Better Life for all Kenyans’’.

This year’s budget is seen as a tough balancing act for Rotich, who walks a tight rope trying to grow tax revenues with new measures even as he tries to pay public debt, which has hit the Sh4.6 trillion mark.

The proposed budget shows that  the total debt to be serviced in the next financial year stands ay Sh871 billion. With a number of domestic debts maturing in the next financial year, the pressure is now on Rotich who will be forced to borrow about Sh563 billion to bridge the gap from the Sh3.074 billion spending.

Treasury will also be forced to make repayments including the Sh194 billion for the 2014 sovereign bond and two syndicated loans.

Legislator Kimani Ichung’wa,who chairs the Budget and Appropriation Committee (BAC) of the National Assembly, says all committees must align the budget within the purview of the Medium Term Plan 3 (MTP3), however, he admits there are some information gaps that may hinder achievement of some key big four agenda projects.

“The proposal to enlist 100,000 community health volunteers under universal health coverage is not mentioned in the 2018/19 budget estimates,” he said, adding that others including digitisation and incentivising private investment in the heath sector are also not clear.

“It is not clear how or whether these targets are on course as these are missing in the 2018/19 estimates,” he says in the BAC reports.

He says that under manufacturing, MTP3 contains proposals for the construction of automotive parts and components and supporting establishment of an automotive industry in Kenya, but the same is not embraced in the 2018/19 budget estimates, which may imply that the proposal, a primary part of manufacturing, will remain in abeyance.

“Establishment of the national social housing development fund is not part of the budget proposals,” the report says.

But the committee also suggested deductions which took away from sectors that would spur growth in sectors where the Big Four Agenda leverages on.

For example, the committee advises that Sh100 million be deducted from the National Council for Science, Technology and Innovation. It also advised that Sh400 million be deducted from the Development of the Kajiado Leather Factory in the State Department for Industry.

Speaking to People Daily on the way forward regarding the huge budget deficit amid debt, Michael Mburugu, a tax partner at PKF advises that the government must focus more on external financing but not through short-term debt.

“Through long term debt and largely through PPP initiatives, the government should be able to restructure in order to package a lot of it’s debt committed into projects that are self sustaining, commercially viable and those that can be able to finance themselves over a period of 25 years,” he said.

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