Treasury Cabinet Secretary Ukur Yatani on Thursday presented his maiden budget that came in the middle of a health crisis expected to deflate the country’s projected economic growth from 5.4% to 2.5%.
Yatani was facing a tough balancing act while crafting his Ksh2.7 trillion budget and the Ksh840.6 billion deficit still presents the cabinet secretary with a conundrum considering that the Kenya Revenue Authority (KRA) is being asked to raise Ksh1.6 trillion from a depressed economy.
In his speech to a parliament, Yatani outlined how the government intends to spend in the fiscal year beginning July 1 while announcing a raft of taxation measures the government is proposing to raise some much needed revenue.
Allocations
Ksh10 billion for the “Kazi Mtaani’ initiative aimed at cleaning Kenyan towns with an emphasis on informal settlements. The initiative is expected to provide jobs for some unemployed 300,000 youth who have been negatively affected by the pandemic.
Ksh56.6 billion has also been set aside to cater to the eight-point stimulus program unveiled by President Uhuru Kenyatta as the first step to jumpstart the Kenyan economy.
Ksh128.3 billion has been set aside for President Uhuru Kenyatta’s legacy plan, The Big Four Agenda that aims to channel more resources to Food Security, Universal Healthcare, Manufacturing, and Affordable Housing.
Ksh843 million has been set aside for the modernisation of Rivatex.
Ksh5.5 billion for national agriculture and rural inclusivity programme, Ksh730 million for food security and crop diversification project and Ksh10 billion for irrigation land reclamation.
To support the fight against corruption, Yatani said that the Treasury will be allocating Ksh3.1 billion to the Ethics and Anti Corruption Commission (EACC) and Ksh3.1 billion to the Office of the Director of Public Prosecutions (DPP) while the Directorate of Criminal investigations has been allocated Ksh7.9 billion.
Ksh4 billion has also been set aside to waive Kenya Certificate of Primary Education and Kenya Certificate of Secondary Education (KCSE) fees.
Ksh5 billion has also been set aside for the rehabilitation of roads while the Nairobi Metropolitan Services Authority (NMS) will receive Ksh26.4bn funding, including Ksh15.9billion slashed from Nairobi County’s equitable share.
The health sector has been allocated Ksh111.7 billion which includes Ksh5.3 billion for the transformation of the country’s health care systems, Ksh15 billion for the Kenyatta National Hospital (KNH), Ksh10 billion to the Moi, Teaching and Referral Hospital (MTRH), Ksh7.2 billion to the Kenya Medical Training College (KMTC), Ksh2.5 billion to the Kenya Medical Research Institute (KEMRI) and Ksh2.1 billion to Mathari hospital.
“Mr Speaker, the current COVID-19 is a reality and we have allocated an extra Sh1.2 billion which will be used to recruit an additional 5,000 health workers for a year,” said Yatani in his adress.
Taxation Measures
The Treasury Cabinet Secretary also proposed threshold for rental income tax be revised upwards to Ksh15 million per anum from Ksh10 million.
Treasury also proposed to introduce a minimum tax payable by all companies at the rate of 1% of gross turnover as a stop-gap measure to bust companies that evade taxes but still benefit from amenities funded by loyal taxpayers.
CS Yatani also proposed a three-year voluntary disclosure program to allow Kenyans who made omissions in tax returns in the last five years to pay dues owed without interest and penalties.
Treasury also proposes introduction of digital service tax on value of transactions at the rate of 1.5%
According to Yatani, the new tax measures will raise an additional Ksh38.9 billion in revenues as the government grapples to find ways too plug a Ksh840.6 billion deficit.
Pending Bills
Yatani also dropped a bombshell while directing all ministries, departments and government agencies to settle their pending bills failure to which funding will be withheld.
The cabinet secretary also asked counties to clear their pending bills but noted progress is being made by the devolved units stating that 75% of counties pending bills had been cleared by the time of presenting the budget.
Debt
With the country’s debt obligations standing at Ksh905 billion for the next financial year, the CS revealed that the government has managed to get short term moratoriums on its loans but stated that talks are still ongoing with different lenders even as the deficit stands at Ksh840.6 billion deficit and reccurent expenditure at Ksh1.8 trillion.
“We appreciate the initiative of the G20 and the multilateral financial institutions to press for a debt moratorium for about 6-7 months up to December. We’ve looked at it. We are happy with the proposal but based on the circumstances. We are still not sure we are trying to push for better terms, better concessions because as it stands some of the conditions regarding debt relief are quite punitive,” said Yatani.
“I am not worried about the recurrent expenditure at all. At this time for us to continue cushioning the economy investment at all levels whether recurrent or development is necessary to keep the country going because the product and supply that are procured locally is what keeps the engine going,” added the CS.
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