•Yatani has adjusted upwards spending in key areas seen to be drivers and enablers of the Big Four Agenda.
•The private sector is keen on debt and taxes as the government continues to borrow heavily to bridge the budget deficit and meet its development targets.
Image: /FREDERICK OMONDI
All eyes are on the National Treasury, as it puts the final touches on the 2021/22 financial year’s budget to be presented to the nation on Thursday.
Cabinet Secretary Ukur Yatani will break down to the public the country’s spending and the tax measures for the new financial year starting July 1 to June 30, 2022.
The budget is set higher at Sh3 trillion up from the current financial year’s 2.8 trillion.
The CS is expected to balance between post-Covid economic recovery and driving President Uhuru Kenyatta’s Big Four Agenda, whose implementation has equally been slowed down by the pandemic.
Yatani has adjusted upwards spending in key areas seen to be drivers and enablers of the agenda in the budget dubbed 'Building back better days: Strategy for resilient and sustainable economic recovery.
The private sector is keen on debt and taxes as the government continues to borrow heavily to bridge the budget deficit and meet its development targets.
In the Budget Policy Statement released in February, Yatani had indicated a recurrent expenditure of Sh1.975 trillion (15.8 per cent of GDP) up 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, with major budget cuts expected as the government tames spending in a depressed economy occasioned by the pandemic.
KRA is expected to collect Sh1.8 trillion up from Sh1.6 trillion in the current financial year ending June 30.
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.
Yesterday, consulting firm– PKF called for restructuring of the country’s debt to match the life of key ongoing projects, to avoid getting into a debt trap.
The country’s total debt is currently at Sh7.339 trillion, Central Bank of Kenya data shows.
It recommends alternative sources of financing such as public-private partnerships.
“Kenya’s debt has ballooned over the last few years with 50 per cent of the debt being foreign, and therefore the stability of exchange rates will play a big role in the sustainability of these debts going forward,” PKF said in a pre-budget analysis yesterday.
Most of this debt has been expended towards big infrastructural projects whose benefits will be realised in the long term.
Manufacturers are hopeful their memorandum to treasury was considered with high taxation and VAT refunds being a major concern.
The Kenya Association of Manufacturers (KAM) wants tax increases frozen to increase cash flow for both Kenyan businesses and citizens, as the impact of Covid-19 pandemic continues to hurt the economy.
According to KAM, the unpredictability of the taxation regime has continued even during the Covid-19 pandemic, which has caused businesses to re-evaluate and, in some instances, to relocate their operations.
“This trend needs to be urgently reversed so that Kenyan can reinvigorate the economy,” KAM chief executive Phyllis Wakiaga notes.
Manufacturers are calling for the reversal of some tax proposals which are threatening the speedy recovery of businesses, including the repeal of 1% minimum tax introduced under Finance Act 2020.
They also want the reinstatement of 150 per cent investment deduction outside of the main industrial counties by amending Tax Laws Amendment Act 2020.
The post Covid-19 Economic Stimulus Programme (PC-ESP) also need to increased, according to KAM , to approximately five per cent of the GDP (Sh500 billion,) from the initially proposed Sh26.6 billion, given the size of Kenya’s economy.
“In the stimulus package, the government should give priority to strengthening the health sector in terms of infrastructure and personnel, purchase of locally produced goods to support businesses and labour-intensive programs and payment of pending bills,” KAM says in a memorandum to Treasury.
The real estate sector is keen on the cost of construction and land availability.
Mizizi Africa Homes CEO George Mburu says the government should come up with ways of freeing up public land to private developers at subsidised costs or payable in a flexible long-term period.
This, he says, will significantly reduce the cost of construction with the benefits set to trickle down to Kenyans and the prospective homeowners.
Similarly, the government should review VAT on construction materials. Since its introduction earlier in the year, the cost of key building materials have risen significantly and stand in the way of delivering affordable houses,” said Mburu.
The Institute of Social Accountability (TISA) wants treasury to ensure that all projects cited in the Auditor General reports for corruption are not included in the budget, and put measures to tame “wasteful recurrent spending.”
Heavy spenders in Yatani’s budget include education which in February had 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.
The CS remains optimistic the economy will bounce back with a projected growth of 6.4 per cent this year from 0.6 per cent in 2020 when the pandemic hard hit key sectors.