The Jubilee Government has moved to tame its expenditure on
infrastructure in the wake of tough...
economic times with next year’s expenditure proposals showing just a marginal increase in public spending by only 1.6 per cent.
economic times with next year’s expenditure proposals showing just a marginal increase in public spending by only 1.6 per cent.
While
proposals by the Treasury show marginal increases on spending in capital
investments on infrastructure development, spending on energy, security
and the youth is set to rise while crucial sectors like agriculture,
public administration and international relations will have to do with
budget cuts.
This is as the
government, which is faced with the reality that the Kenya Revenue
Authority (KRA) is finding it difficult to meet revenue targets, still
has to find money for the Independent Electoral and Boundaries
Commission (IEBC) to administer the General Election next year.
Early
this month, the electoral body indicated that it needs Sh40.2 billion
for the exercise, double the Sh24 billion it spent in 2013, as it aims
to increase the number of polling stations.
The
public have until Wednesday next week to make submissions before the
budget proposals are presented to the Cabinet for approval and submitted
to Parliament by February 15. Once approved, the statement will guide
the government revenue and expenditure plan for the next 12 months
starting July.
Under the plan, the
government proposes to increase expenditure to Sh1.78 trillion, up from
Sh1.76 last year, with recurrent expenditure still taking the lion’s
share of Sh879 billion, up from Sh784 billion last year.
“The
total expenditure and net lending are projected at Sh2.01 trillion or
28.5 per cent of Gross Domestic Product from the estimated Sh1.9
trillion or 29.6 per cent in the current year,” says the document by the
Treasury.
Development projects will
take up to Sh682 billion, a marginal one per cent increase from last
year, when they took Sh675 billion which was a 21 per cent jump from the
previous year.
“The government has
reviewed revenue projections for the financial year downwards on account
of the weaker-than-expected performance to December 2015 and in line
with the revised macro-economic conditions,” Treasury
Principal Secretary Kamau Thugge said.
The
government has been forced in the current fiscal year to reduce its
spending after revenue collection by KRA fell by Sh46.9 billion.
A tough economic environment last year led to massive losses, profit warnings and job cuts.
By
Friday, 20 companies listed at the Nairobi Securities Exchange had
issued profit warnings, meaning that they expect their profits to fall
by more than 25 per cent. And while the NSE represents just a fraction
of the companies operating in the country, analysts have time and again
warned that poor performance of listed companies is an indicator of
overall poor performance of the macro-economic environment in the
country.
The leading economic
indicators for the last quarter of 2015 tilted towards loss as a
strengthening dollar, insecurity, high interest rates and high costs of
production hit businesses hard, leading to an economic slowdown.
RECURRENT EXPENDITURE
Lower
profits by businesses have far-reaching implications on the
government’s ability to meet its development agenda or fund its huge
recurrent expenditure as corporation tax is among the biggest sources of
revenue for the KRA.
Businesses in Kenya pay up to 38 per cent of their earnings as tax.
To
cushion itself from revenue collection shortfalls, the government has
proposed to once again borrow expensive medium-term debt from
international capital markets similar to the now controversial Eurobond.
“The
government’s borrowing plans remain anchored on the medium-term debt
management strategy, which aims at ensuring public debt sustainability,”
says the plan.
“We also remain
committed to accessing international capital markets with a view to
continued diversification of our funding sources in order to reduce
pressure on the domestic borrowing market.”
Under
the new proposal, government spending on energy is set to rise by eight
per cent to Sh404 billion while spending on security is set to rise by
4.5 per cent to Sh117.2 billion.
“Increase
in capital investments in energy, infrastructure, ICT sector and other
development expenditure in general reflects the priority assigned in our
growth objectives,” said Mr Thugge.
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