Kenya’s 2020/21 Budget
Kenya’s budget for the financial year beginning 2020-21 will be Ksh. 2.7 trillion, as presented by Treasury CS Ukur Yatani. The Covid-19 pandemic has ravaged the otherwise robust economy in Kenya and crippled most sectors. New ways have to be sought and explored to revive the economy, and stabilise key sectors such as tourism which were hardest hit.
Considering the economy was initially growing at a steady rate of 5.4 % (2019) and forecast of 5.8%-6.5% by 2024, the epidemic which has affected the global economy has had a disruptive effect that requires going back to the drawing board. Other than the Covid-19 epidemic, flooding and locust invasion have equally affected key economic sectors.
The government had initially overborrowed, and is currently servicing loans of huge amounts. Deficit spending could be described as a situation where the government spending exceeds revenue over a period of time. It is the opposite of budget surplus, where revenue exceeds spending.
The Kenyan government has set a deficit of 7.5% of the GDP for the 2020/21 financial year. The deficit for 2019-2020 ending June was revised from 8.3% to 6.3%.
Here are the key highlights:
The government relies on taxes to raise revenue to offset the pending loans and fund its organs to function. The Treasury has imposed 1.5% taxes on digital transactions, as the government locks on the growing e-commerce business in the country.
The treasury has also imposed 1% minimum tax on revenue for all companies. This is in a bid to tax companies which file nil returns citing losses. A 3 year grace period has been given to companies which evade tax, to declare the correct tax so as to enjoy a waiver on tax, as the tax collector (KRA) breathes down fire on rogue tax defaulters.
Education has been adversely affected, even as schools and all learning institutions remain suspended as the Covid-19 continues to ravage the country. The treasury has waived the examination fee for KCPE and KCSE candidates.
This is a relief for parents and sponsors of thousands of candidates, as the Education ministry seeks consensus on the way ahead for the candidates.
Specifically, the education sector will be allocated Ksh. 59.4 billion for free primary and secondary education. Ksh. 1.8 billion will be allocated for the school feeding program. Public universities will have a Ksh. 94.9 billion support kitty for education.
Small and Medium Enterprises
The Treasury CS Yatani directed ministries, departments and government agencies to clear all pending bills in respect to SMEs. The government has been committed to support the SMEs, but it is worrying that many are owed by government organs and agencies for supplies. The CS stated categorically that the funds will be withheld if the bills are not cleared.
The National Debt
Treasury CS stated: “ Our debt remains sustainable, despite some of the debt burden indicators deteriorating due to the impact of the Covid-19 epidemic which has elevated expenditure pressure.”
The government has the option of concessional borrowing, which it will pursue. The public projects will be funded through public-private partnerships.
Money held up in stalled and slow moving projects will be allocated to fast, essential and dynamic projects. This is a necessary move to avoid plundering of public funds through corruption and servicing white elephants.