Treasury Cabinet Secretary Ukur
Yatani. His task is to balance the bigger budget against shrinking
revenues as businesses shut down, workers lose jobs or face pay cuts and
exports decline. [File]
Business
Sectors likely to be hit most include agriculture, manufacturing, education, health, tourism, finance,
social work and energy.
The coronavirus pandemic sent the Treasury mandarins back to the drawing
board, abandoning austerity to cushion the economy, which is expected
to slow down to the lowest point since the 2007 post-election violence.
Kenya was already out of breathing space, with huge debt repayments and
stagnant taxes but is now expected to spend more without borrowing
itself into a crisis.
In the Budget estimates the national government had projected it could
cut expenses for the first time from Sh1.836 trillion to Sh1.804
trillion but now it has been forced to ramp up spending to Sh1.883
trillion.
“In light of the follow-up post Covid-19 Economic Stimulus Package
interventions that saw a net increase of Sh32.4 billion spending coupled
with interactions with various National Assembly departmental
committees, Budget and Appropriations Committee has recommended budget
allocation to the national government at Sh1.883 trillion,” said
Churchill Ogutu, a senior research analyst at Nairobi-based Genghis
Capital.
Treasury Cabinet Secretary Ukur Yatani’s first Budget has come under
spotlight on how he will balance the bigger budget against shrinking
revenues as businesses shut down, workers lose jobs or face pay cuts and
exports decline on supply chain interruptions.
The mathematics whose finer details would be unveiled today must have been tough.
The government has indicated its intention to support specific crucial
sectors of the economy from collapsing all together, while cushioning
vulnerable Kenyans from losing their livelihoods with direct welfare
cheques.
Tourism retail and trade have been worst hit by cancellation of
bookings, restrictions on movements and operational times by imposing a
dusk to dawn curfew, and the impact is set to persist after President
Uhuru Kenyatta extended the partial lockdown for another 30 days.
Generous income, sales and value added tax to help ordinary households
navigate ravages of the pandemic, which has already cost tens of lives
in the country, have created a Sh172 billion unfunded budget hole.
Millions of jobs have been swept away and for those workers who survived
the redundancies, their incomes have been slashed as employers seek to
remain afloat.
Even as the government loses revenues it has been forced to commit extra
resources, including Sh54 billion stimulus to tackle the impact of the
disease in the current and into the next financial year, which begins on
July 1.
That comes on the back of the mounting debt repayments schedule set to hit Sh823 billion.
Debt relief
While Paris club of G20 countries and China have offered different debt
relief packages that could save Kenya some of the cost of financing
repayments, the Treasury has expressed caution over implications of the
relief.
Kenya may face credit ratings downgrades and specific clauses in the
Eurobond prevent Treasury from seeking dollar debt moratoriums.
Hence, Kenya may still have to spend nearly half of its entire revenues to pay debt.
Yesterday, Yatani spent hours appraising his boss, President Uhuru
Kenyatta, before making known how, if at all, his Budget would tackle
these glaring imbalances amid the unfolding calamity.
Officials aware of Yatani’s schedule told The Standard about
the frantic moments with the pull and push between his office and the
National Assembly, which is the ultimate authority in the budget-making
process.
It was not immediately possible to get through to the CS who has
previously shown his hand on how the taxation regime would change in his
Finance Bill, which outlines how the revenues would be raised.
Tax incentives
In April, he announced that the government will no longer give tax
incentives to the rich as part of how the revenues would be raised.
National Treasury is, however, optimistic to ramp up an additional
Sh117 billion from wealthy individuals and industries through a modest
reversal of tax exemptions.
The areas being targeted include buying of helicopter engines, which had
been exempted from tax, yet it has had little meaningful benefits to
ordinary citizens.
Sectors likely to be hit most by the mass repeal of tax incentives as
Treasury moves to shore up its coffers include agriculture,
manufacturing, education, health, tourism, finance, social work and
energy.
Mr Yatani told The Standard then that the government has been
giving tax incentives valued at Sh535 billion, which has not translated
into remarkable improvement in investment and employment.
“We are trying to avoid a situation where the ordinary person will be
affected,” he said, noting that they will instead be going after heavy
expenditures such as hiring of helicopters in what is likely to hit
politicians, most of who are fond of hobnobbing around the country by
air.
“You buy an engine for a plane we charge no taxes. And if you ask how
the ordinary mwananchi is going to benefit it is not much,” said Yatani.
However, Treasury has come under fire for taking advantage of the
current economic crisis to introduce what analysts say are sweeping tax
changes that have little bearing on the ongoing stalemate.
Indeed, the re-introduction of the 14 per cent value-added tax (VAT) on
cooking gas might hit the very poor the government is trying to protect.
Following the ban on logging and introduction of anti-adulteration levy, ordinary Kenyans have shifted to cooking gas.
Even those selling land or homes will also have to pay a five per cent
capital gains tax, a move that analysts say will discourage investments,
with most people opting to sit on their property rather than sell them.
However, Yatani was bullish that some of the things they are reversing have had no benefit to mwananchi.
“So these are things that we are reversing because we realised that the
benefits which were intended to be facilitated and passed on to the
ordinary people are not done. You just balloon their profits and not
going to the citizen,” he said.
No comments :
Post a Comment