ECONOMY

Analysts Question Treasury’s Overambitious Sh2.7 Trillion Budget

Samuel GitongaJun 9, 20202 Mins read3.2k

Treasury Cabinet Secretary Ukur Yatani during his vetting in 2017. Treasury has proposed borrowing Ksh1 trillion to plug deficits in the next FY.

Treasury Cabinet Secretary Ukur Yatani is expected to present the budget for the Financial Year 2020/2021 on Thursday but once again the government once again finds itself unable to shake off claims that it is being unrealistic in its planning.

Parliament’s Budget and Appropriations Committee (BAC) has expressed reservations over the government’s underestimation over the impact the COVID-19 Pandemic will have on Kenyan businesses and incomes meaning that collection, in turn, is expected to be subdued.

“Due to the effects of COVID-19, it is projected that revenue will underperform and may amount to Ksh.1.396 trillion only based on month on month performance of all the tax heads. If the pandemic persists, the situation is likely to be aggravated therefore even the revenue projection of Ksh.1.62 trillion for the year 2020/21 maybe overestimated,” the commitee noted in a report tabled in parliament last week.

Of the Ksh2.7 trillion, Ksh1.8 trillion shillings is expected to be pumped into recurrent expenditure, Ksh589.4 bn into development expenditure while Ksh53.79 billion has already been listed as a COVID-19 Stimulus Package bringing the total budget to Ksh2.7 trillion.

“I think to some extent the budget is somewhat overambitious. If you look at all revenue streams, I still feel at Ksh1.9 trillion as total revenues and the ordinary revenue at Ksh1.6 trillion it is still on the higher side, we may not even achieve it,” said Churchill Ogutu, Head of Research at Genghis Capital said in an interview on Monday.

The issue of over-ambition is well captured by the fact that Treasury has been forced to revise its estimates since publishing the BPS. For instance, total revenues were revised from Ksh.2.1 trillion in the original budget to Ksh.2 trillion and now to Ksh1.9 trillion.

“I think the COVID-19 shock is long lasting and the impact has not fully been realised at the moment,” added Ogutu.

The Parliamentary Budget Office (PBO) estimates that the disruption caused by the COVID-19 Pandemic will cost the government Ksh122 in revenues, which could be plugged by funding the governmnet has received from development partners since the oubreak of COVID-19 in the country.

Further, the Budget and Appropriations Commitee warns that Treasury’s Ksh2.7 trillion budget could rise to Ksh3.2 trillion if debt redemptions are factored in.

The BPO had recommended that the government initiate debt restructuring costs to free up money that would have otherwise been used to pay loans redirected to deal with the COVID-19 Pandemic.

Allocations

The Teachers Service Commission (TSC) will receive the largest share of the national cake with Nancy Macharia’s commission set to be allocated some Ksh266 billion.

Infrastructure is expected to gobble up Ksh189.5 billion while the Ministry of Interior has been allocated Ksh131.6 billion.

Treasury allocation is Ksh116.9 billion, Ministry of Health Ksh117.7 billion, Ministry of Energy 72.4 billion while Higher Education has been allocated Ksh113.3 billion.