- Many people had expected the National Treasury to review the high tax regime on petroleum products.
- CS Yatani gave a general statement on efforts to ease the cost of living, clarifying 10% excise increase was only on luxury products.
Households battling the high cost of living were largely left out in President Uhuru Kenyatta’s final budget proposal presented Thursday in Parliament.
In a budget outline tending to favour business and industry, Treasury CS Ukur Yatani maintained current tax measures on key household products in the food basket.
That move is likely to cause the current high cost of living to persist, if not worsen.
The budget estimates appear to favour job creation, economic revival. Yatani goes for gambling, alcohol and cigarettes for more revenue.
Many people who spoke to the Star had expected the National Treasury to review the high tax regime on petroleum products, especially Value Added Tax on fuel and gas introduced in the last two financial years.
Today, tax accounts for 52 per cent of the total value of a litre of super petrol, with the eight per cent VAT imposed in 2019-20 taking the lion’s share.
High fuel prices affect almost all other products as manufacturers pass on production and transport costs to end consumers.
According to the latest monthly price review by the Energy and Petroleum Regulatory Authority, a litre of super petrol retails at Sh134.72 in Nairobi, up from Sh129.72. Diesel will sell for Sh115.60, up from Sh110.60.
The price of kerosene mostly used by rural and urban families for cooking and lighting has been retained at Sh103.54 per litre.
However, the current fuel shortage caused by the ongoing supply glitch in the global market and a tug of war between the government and oil marketers over subsidies have forced users to buy a litre of petrol for as much as Sh200.
A spot check at various retail stores shows prices of basic food products are rising daily. They include maize flour, wheat, rice and cooking oil.
However, in his tax measures, Yatani spared a 10 per cent additional excise duty increase on petroleum products, perhaps a slight relief to consumers.
This budget is futuristic. While it may not address the current situation, it has measures to improve food security and manufacturing that will yield an affordable lifeTreasury CS Ukur Yatani
He said government is committed to continue the fuel subsidy programme at least until the end of June. This move is likely to cushion consumers from skyrocketing prices in the global market.
The Treasury CS also asked the Kenya Revenue Authority to exclude from inflation adjustment basic household products, after consideration of the prevailing economic circumstances.
To reduce the cost of healthcare, the National Treasury listed tax exemptions on pharmaceutical products, including oxygen masks.
Speaking to journalists, Yatani gave a general statement on government’s effort to ease the cost of living, clarifying that the 10 per cent excise increment was only on luxury products.
“This budget is futuristic. While it may not address the current situation, it contains various measures aimed at improving food security and manufacturing that will yield an affordable life," Yatani said.
“We are aware that food security remains a key concern and that is why we have already allocated resources to subsidise fertiliser at a cost of Sh2.7 billion.
“Last week we allocated Sh3 billion and we intend to allocate additional resources of Sh2.7 billion for the fertiliser to enable farmers to plant their crops in good time,” he added.
The budget proposal for the financial year starting on July 1 has, however, not spared gamblers and smokers. The exchequer has introduced a new tax regime on media airing gaming advertisements.
“To discourage the promotion of these products and activities, I propose to introduce excise duty of 15 per cent on fees charged by all television stations, print media, billboards, and radio stations for advertisements of these activities," Yatani said.
FUNDING AND ALLOCATION
The announcement of Sh3.3 trillion expenditure budget for the coming financial year pushes funding for President Kenyatta's regime to about Sh25 trillion in the past 10 years.
Of this, the government is planning to raise Sh2.4 trillion, with the KRA expected to raise Sh2.1 trillion.
The exchequer has allocated Sh2.02 trillion to the Executive for recurrent expenditure. Parliament and the Judiciary have been allocated Sh39 billion and Sh18.9 billion, respectively.
Although Kenya had set an ambitious target of a 4.6 per cent budget deficit in the second medium-term ending June, it has a significant budget gap of at least Sh862 billion that is expected to be funded through borrowing.
Yatani said the country will borrow Sh280 billion externally and Sh581 billion domestically to fill the budget deficit. Those numbers represent an improvement of close to Sh200 billion, compared with the current financial year.
Meanwhile, pensions and interest payments on both domestic and foreign debts are set to consume Sh864.1 billion.
To cut its reliance on debt to fund the budget gap, Yatani outlined several measures, including funding infrastructure projects through public-private partnerships.
He also proposed to cap the debt ceiling at 55 per cent of GDP as opposed to debt in absolute figures.
Kenya’s debt currently is Sh8.2 trillion, pushing upward against a ceiling of Sh9.1 trillion.
County governments, meanwhile, will split Sh370 billion from the equitable share of the national cake and a further Sh37.1 billion in conditional grants.
The counties’ conditional grants include Sh5.2 billion for the leasing of medical equipment, Sh454 million for the supplementary construction of county headquarters and Sh31.4 billion as the allocation to them from loans and grants.
The Ministry of Education will receive the lion’s share of the Executive’s budget at Sh525.9 billion, ahead of the Energy ministry and National Security at Sh368.3 billion and Sh203.1 billion, respectively.
Uhuru has also splashed Sh146.8 billion on his legacy projects under Big 4 Agenda, which experts have said is underfunded.
(Edited by V. Graham)