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June 20, 2018

Inside the Sh3 trillion 2018/19 budget

The budget briefcase as displayed by Treasury CS Henry Rotich ahead of the reading on May 30, 2017. /JACK OWUOR
The budget briefcase as displayed by Treasury CS Henry Rotich ahead of the reading on May 30, 2017. /JACK OWUOR

This year’s budget has gone up by about 10.83 per cent compared to last year’s which totalled Sh2.77 trillion.

The biggest chunk of the Sh3.074 trillion will go towards funding the functions of the national government (Sh1.6 trillion).

The Consolidated Fund Service will receive the second biggest allocation of Sh962 billion.

The Consolidated Fund is a mandatory spending by the National Government drawn from all revenues collected in a fiscal year.

Its expenditure includes repayment of public debt, payment of pensions and gratuities, and payment of salaries and allowances for constitutional office holders, and subscriptions to international organisations.

The Attorney General, High Court Judges, Court of Appeal Judges, Budget Controller, Auditor General, IEBC commissioners, and Public Service Commissioners are all paid their salaries from this fund.

No money can be withdrawn from this fund except as may be authorised by the Constitution, an Act of Parliament or a vote on account by the National Assembly.

Over half of the national government’s allocation will go towards financing the recurrent expenditure (61.01%).

Out of this, Sh416.86 billion will go towards paying salaries. The figure represents 32.42 per cent of national government’s total allocation.

Infrastructure will take the biggest chunk of the funds allocated for development (Sh112.99 billion). Transport will take Sh90.42 while energy will take Sh59.89 billion.

In total, development will take 38.99 per cent of the national government’s total allocation.

Read: Cost of unga, milk, drugs to go up in budget

Also read: Budget to reveal how Kenya plans to deliver on ambitious priorities

On debt repayment, Treasury has allocated Sh870 billion, representing a 25.79 per cent compound growth from three years ago.

This will cause the debt service to revenue ratio to 51.56 per cent yet the sustainable debt service ratio should be 30 per cent.

According to Treasury, Kenya’s debt obligation is expected to hit a 'historic' Sh5 trillion by June 2019.

Counties will make do with Sh372 billion, this being Sh31 billion more than the previous financial year’s allocation.

Of this, Sh314 billion will go towards equitable share, Sh17 billion will cover Conditional allocation from the national government while Sh8.2 billion will go to Fuel Levy Fund.

Conditional Fund, which includes loans and grants, has been allocated Sh33. 2 billion.

Parliament will get Sh42 billion while the Judiciary will get Sh17 billion.

The budget which will be read by Treasury CS Henry Rotich in Parliament on Thursday afternoon, however, proposes that Judiciary’s share be slashed by Sh2.5 billion.

However, the budget has a deficit of Sh562 billion. This will require more borrowing both from foreign and domestic sources to bridge the gap.

Towards this end, the government expects to raise Sh1.74 trillion in revenue.

Foreign borrowing will raise Sh282 billion, domestic borrowing Sh276 billion and other domestic funding will Sh4 billion.

CS Rotich has proposed to raise revenue through the Income Tax Bill 2018.

The Bill proposes an increase in individual tax rate to annual income above Sh9 million from 30 per cent to 35 per cent.

It also proposes an increase in corporate tax rate to companies with annual taxable income exceeding Sh500 million from 30 per cent to 35 per cent.

Further, the Bill proposes a 15 per cent presumptive rate single business permits issued by county governments.

The Bill also seeks to move some items from zero rate to exempt.

This is likely to push the cost of a number of basic goods up.

These include medicine, fuel, and wheat and maize flour products.

Apart from Kenya, Uganda, Rwanda, Burundi, and Tanzania will also be presenting their budgets today in a culture that started 11 years ago. 

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