•Treasury CS Ukur Yatani has proposed a higher recurrent expenditure which has increased to Sh1.975 trillion (15.8 per cent of GDP) from Sh1.776 trillion.
•Development spending is on the other hand projected to reduce to Sh611 billion from Sh678.5 billion in the current financial year.
Image: /FREDERICK OMONDI
Kenya plans to spend at least Sh2.968 trillion in the next financial year starting July 1, as the government works out its post-Covid-19 recovery.
This is about Sh90 billion more than the current financial year's Sh2.8 trillion even as the economy continues to suffer from the impact of the Covid-19 pandemic.
In the proposed budget, treasury has adjusted upwards spending in key areas seen to be drivers and enablers of President Uhuru Kenyatta's “Big Four Agenda”.
Yesterday, Cabinet Secretary Ukur Yatani called for input, including public participation by February 1, in the 'Draft 2021Budget Policy Statement' (BPS) ahead of its submission to Cabinet for approval and subsequently submission to Parliament.
In the budget dubbed 'Building back better days: Strategy for resilient and sustainable economic recovery', Yatani has proposed a higher recurrent expenditure of Sh1.975 trillion (15.8 per cent of GDP) from Sh1.776 trillion.
Development spending is on the other hand expected to reduce to Sh611 billion from Sh678.5 billion in the current financial year.
The government has embarked on expenditure rationalization and prioritization to ensure that expenditures are on the most impactful programmes that yield the highest welfare benefits to KenyansNational Treasury CS UKur Yatani
To finance the high spending, Kenya Revenue Authority is expected to collect Sh100 billion more which puts its next financial year's ordinary revenue target at Sh1.7 trillion.
This is despite the tax body struggling to hit its target in previous financial year's, with the current one proving to be an uphill task due to the pandemic.
The deficit will be financed by debt where the government plans to borrow slightly above Sh1 trillion with Sh572.7 billion to be sourced locally while foreign borrowing is pegged at Sh427.5 billion.
Heavy spenders include education which has a proposed budget of Sh510 billion up from Sh505 billion, energy, infrastructure and ICT (Sh401.3 billion from Sh362.7 billion) , national security (Sh170 billion from 154.3 billion) and health (Sh119.9 billion from Sh111.7 billion).
“The energy, infrastructure and ICT sector plays a significant role as a driver and an enabler in the implementation of the Big Four Action Plan,” CS Yatani notes in the BPS.
Spending in general economic and commercial affairs which covers manufacturing, trade and other related sectors is however expected to reduce with Treasury cutting spending to Sh23 billion from Sh27.9 billion.
Expenses on environment protection, water and natural resources has been cut to Sh102.8 billion from Sh105.2 billion.
In the financial year 2021/22, revenue collection including Appropriation-in-Aid (A.i.A) is projected to increase to Sh1.985 trillion (15.9 per cent of GDP) up from the estimated Sh1.829 trillion (16.4 per cent of GDP) in the current financial year.
“Revenue performance will be underpinned by on-going reforms in tax policy and revenue administration,” says Yatani.
He remains optimistic the economy will bounce back with a projected growth of 6.4 per cent this year from the projected 0.6 per cent in 2020.
The stable macroeconomic environment, turn around in trade as economies recover from Covid-19 Pandemic and expected favourable weather that will support agricultural output will support this growth outlook, the CS notes.
To further reinforce this growth outlook, the policy measures outlined in the 2021 Budget Policy Statement aims at stimulating economic recovery.
Building on the gains made under the Economic Stimulus Programme, the government plans to roll out a Post Covid-19 Economic Recovery Strategy (ERS) which will mitigate the adverse impacts of the pandemic on the economy and further re-position the economy on a steady and sustainable growth trajectory.
Policies in the next financial year BPS are anchored on the Medium-Term Plan III of the Vision 2030 as prioritised in the “Big Four” Agenda.
The focus of the policies is to continue providing an enabling environment for economic recovery to safeguard livelihoods, jobs, businesses and industrial recovery.
Government will focus on completing ongoing projects, according to Yatani's plan, with a freeze on huge spending in new mega projects.
In the current financial year, budget execution in the first half for the financial year 2020/21 was hampered by revenue shortfalls and rising expenditure pressures.
The shortfalls in revenues reflect 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 Covid-19 pandemic, which left the government with a Sh172 billion hole in revenue.
Revenues are expected to progressively improve in the second half of the fiscal year following the gradual reopening of the economy and the increased demand for imports as well as improved domestic sales.
KRA collections are also expected to get a boost from reversal of tax reliefs, introduced in April 2020, effected back this this month.
Revenue collection to December 2020 declined by 14.0 per cent compared to a growth of 17.1 percent in December 2019.
This decline is attributed to the difficult operating environment due to the Covid-19 pandemic which has been adversely affecting revenue performance from March 2020.
The cumulative total revenue - inclusive of ministerial Appropriation in Aid (AiA) amounted to Sh 800.1 billion against a target of Sh907.7 billion, with shortfalls recorded in both ordinary revenues (Sh75.8 billion) and A-I-A (Sh31.8 billion).
“The government has embarked on expenditure rationalisation and prioritisation to ensure that expenditures are on the most impactful programmes that yield the highest welfare benefits to Kenyans,” says Yatani.