• The government is also considering a new transport policy to manage the number of vehicles owned by officials and use of fuel cards to cut cost.
Image: ENOS TECHE
Government plans to reduce debt by cut of expenditure and increasing revenue may be unattainable, according to economists.
Regional East Africa economist at Stanbic Bank Jibran Qureishi said the assumptions stated are based on growth and revenue collections which may be unrealistic.
“It is easier said than done. The reduction on debt may start by cut on infrastructure expenditure which also cannot be done in a year,” he said.
While presenting the 2019/20 budget, Treasury CS Henry Rotich stated that reduction of fiscal deficit will be the key agenda in the financial year beginning July 1.
The government plans to introduce use of smart card for traveling public officials whether on foreign or domestic trips on official duty.
The government is also considering a new transport policy to manage the number of vehicles owned by officials and use of fuel cards to cut cost.
"The policy will promote local industries by requiring that all government vehicles be procured only from local assembling plants,” Rotich said.
International Budget Partnership country manager Abraham Muriu said the measures are not new and have been tried before but the problem has been the follow-up.
There is a deeper fiscal problem within the system due to complexity of the national government with a number of institutions, agencies and committees," Muriu said.
He added that introduction of card will increase cost rather reduce, because of need to monitor each.
This spending is against announced tax measures and amendments to be introduced through the Finance Bill, 2019, expected to generate an additional Sh37 billion in revenue to the Exchequer.
Among them include proposals to increase the Capital Gains Tax from 5 per cent to 12.5 per cent. The policy will affect transfer of property and sale of equities.
Security services, cleaning and fumigation services, catering services offered outside hotel premises, transportation of goods excluding air transport services, sales promotion, marketing and advertising services will now be subjected to withholding tax.
"Administration of revenue collection in counties has been different and not automated. there is need for an new tax module to consolidate all revenue and reach top authority," Muriu added.
Expenditures and net lending are projected at Sh2.8 trillion, leaving a fiscal deficit including grants of Sh607.8 billion. According to Rotic, this deficit translates to 5.6 percent, a decline from 6.8 percent in FY 2018/19 and 7.4 percent for FY 2017/18.
The fiscal deficit will be financed by net external financing of Sh324.3 billion and net domestic financing of Sh283.5 billion.
Revenue collections including appropriation in aid are expected to be Sh 2.1 trillion, out of which Kenya Revenue Authority expected to collect Sh1.8 trillion.
The tax authority is expected to miss this year’s target by Sh118 billion, after reviewing the target to Sh1.605 trillion.
“Kenya continues to meet its debt service obligations promptly with no accumulation of debt arrears. Public debt is within sustainable levels and the debt burden is projected to decline over the medium term as we implement fiscal consolidation plan,” Rotich added.
Some of the key initiatives that the government plans to undertake include leasing all its office accommodation at a uniform cost, which it has been renting at higher than market rates resulting in huge costs.
Rotich has also proposed to limit extension of service for a number of civil servants who retire after the age of 60 years. The government will also restrict new recruitment to technical staff, security personnel, teachers and health workers.
He also announced continuation of the zero-based budgeting process adopted in the beginning of the current financial year to weed out non-priority expenditures from the budget.
This also include the policy of “no new projects” to ensure that government completes ongoing projects.
The government has allocated Sh180.9 billion for on-going roads construction projects and maintenance of roads.
Sh55.8 billion has been allocated for the completion of Phase 2A of the SGR, Sh11 billion for the LAPSSET Project and Sh7.2 billion for the Mombasa Port Development Project.