President Uhuru Kenyatta’s ambitious ‘Big Four’ agenda could be jeopardized by low budgetary allocations to key drivers of the plan, Members of Parliament have cautioned.
Budget and Appropriation Committee says critical sectors that are the drivers of the Big Four agenda such as the agriculture, rural and urban development and the general economic and commercial affairs are the least funded sectors in the proposed Sh2.7 trillion-2019/20 budget.
This is despite the two playing host to Manufacturing, Food Security and Affordable Housing which are three of the four pillars under the Big Four. The fourth pillar is Universal Healthcare.
Treasury Cabinet Secretary Henry Rotich has proposed a Sh59 billion allocation to agriculture, rural and urban development while General Economic and Commercial Affairs (GECA)has been given Sh23.9 bilion, a reduced allocation from Sh31.9 billion in the current financial year ending June 30.
“This is despite the promise under the BPS(Budget Policy Statement) that resources allocation will be align in projects and programs that are the drivers of the Big Four Agenda,” the committee through its chairman and Kikuyu MP Kimani Ichung’wah said.
The remarks were included in the committee’s report on the BPS and the Debt Management Strategy for 2019/20 and the Medium Term.
Doubt has also been raised over the Kenya Revenue Authority’s ability to reach the high revenue targets set in the next fiscal year commencing July 1.
The committee has poked holes in the taxman’s reforms expected to increase taxes, which will go a long way in helping bridge budget deficits and over reliance on borrowing to fund part of the country’s budget.
Government targets total revenue collection including Appropriation-in-Aid amounting to Sh2.1 trillion (18.3 per cent of GDP) during the financial year 2019/20. Ordinary revenue is projected at Sh1.9 trillion (16.5 per cent of GDP).
This is higher than the Sh1.7 trillion during the financial year 2018/19. According to Treasury CS Henry Rotich, projected revenue performance will be underpinned by ongoing reforms in tax policy and reevenue administration.
Some of the reforms include enhanced scanning to detect concealment and increase efficiency in cargo clearing through procurement of additional scanners full integration of all scanners and the Use of Regional Electronic Cargo Tracking System(RECTS) to ensure all goods reach the desired destinations and avoid dumping.
The taxman is also expected to usethird party information to identify non-compliant property developers and ensure they are included in the tax base, and detection of non-compliance through i-Tax data matching.
“The committee is concerned that these reforms have been referred to in previous BPS documents but there has never been a report on the progress achieved so far nor how much will be raised specifically through these reforms. In other words, the impact of these reforms is not quantified,” the committee noted.
“Given the tendency of revenue to underperform in the past years, it is very important to ensure that the revenues projected for 2019/20 are realistic,” it added.
KRA has been missing its target in recent times, blamed mainly on economic, political and legislative changes mainly on the Finance Act.
It is feared that the taxman could miss his target for 2018/19 financial year by nearly Sh300 billion based on current trends, despite the target being revised to Sh1.605 trillion from Sh1.69 trillion.
In the last fiscal year, KRA collected Sh1.37 trillion, missing the Sh1.415 trillion target which had also been revised.
“The National Treasury , in collaboration with KRA should provide clear quantified and realistic tax administration measures towards boosting revenue collection,” the MPs said.
The committee has put higher ceilings for allocations to the National Government, Parliament and Judiciary-Sh1.8 trillion, Sh39.5 billion and Sh18.9 billion, higher than Rotich’s proposed Sh1.7 trillion, Sh38.5 billion and Sh17.5 billion, a move that could see upwards adjustment on the budget to over Sh3 trillion.
The National Treasury earlier this month tabled a Sh2.67 trillion budget before parliament intended to run the country in the next financial year, as proposed spending goes up by 7.8 per cent from the current fiscal year.
The budget which is tailored towards job creation and realization of the Big Four Agenda projects has an overall expenditure and net lending of Sh2.71 trillion(23.9 per cent of GDP) for financial year 2019/20.
This is up from the estimated Sh2.51 trillion (25.1 per cent of GDP) in the current financial year (revised) ending June 30, where it had proposed a Sh2.55 trillion budget before it was revised upwards to Sh3.074 trillion.
Recurrent expenditure goes up 9.9 per cent to Sh1.66 trillion (14.7 per cent of GDP) from the current year’s Sh1.513 trillion.
Rotich has set up Sh670.7 billion for development (5.9 per cent of GDP) up from Sh631.2 billion.
The National government will control Sh1.82 trillion of the budget, an increase from Sh1.75 trillion, with the Executive, Judiciary and Parliament controlling Sh1.76 trillion, Sh17.9 billion and Sh38.5 billion respectively.
Consolidated Fund Services (CFS) under the national government, which gets money for operational costs – salaries and allowances, subscription to international organisations, payment of pensions and gratuities, has been allocated Sh535.7 billion up from Sh490.6 billion.
The education sector is the biggest winner if the budget is approved in its current state which has notable increases in key sectors, save for the Energy, Infrastructure and ICT whose budget has been slashed.
Treasury has allocated the sector Sh473.4 billion to education, seven per cent up from Sh442.3 billion.
According to National Treasury CS Henry Rotich, the huge portion will go towards supporting the sector’s short term priorities which include recruitment of additional teachers to support government’s 100 per cent transition policy.
The funds are also expected to support the free primary, secondary education, and special needs education through increased capitation as the sector takes up 26 per cent of the share in total ministerial expenditure.
“The sector will also complete the ongoing construction and equipment of TTIs(Technical Training Institutes) and support university education in public and private universities in order to equip the youth with relevant skills required to drive the industrialization agenda,” Rotich notes in the BPS.
The second biggest allocation goes to Energy, Infrastructure and ICT which takes up Sh406.7 billion. This however a 2.9 per cent cut from the current year’s Sh418.8 billion allocation.
The reduction comes after the completion of a number of key projects including roads, procurement of a new ferry for the Likoni (Mombasa) channel-MV Jambo, reduced spending on geothermal projects after major achievements.
The government expects to reduce spending on new mega infrastructure projects as focus now shifts to the Big Four agenda with housing as a priority.
Key port, oil and gas, and ICT projects including the Konza Complex are however expected to continue.
Public administration and international relations has been given Sh270.9 billion, governance, justice, law and order sector(Sh204.8 billion), national security(Sh153.6 billion), health (Sh96 billion),Environment (Sh82.3 billion), agriculture, rural and urban development (Sh59.1 billion), social protection Sh54.8 billion and general economic affairs Sh23.9 billion.
The planned higher spend comes amid cries of a swelling national debt which has seen concerns from the International Monetary Fund (IMF) and the World Bank.
The government has in recent times been negotiating for roll-overs among other arrangements as it moves to meet its obligations.
Reflecting the projected expenditure and revenue, the fiscal deficit (excluding grants) is projected at Sh629.9 billion. Overall fiscal deficit is projected at Sh578.3 billion.
The government expects to borrow Sh306.5 billion externally and Sh277.5 billion in the domestic market and other net domestic receipts of Sh5.7 billion to bridge the deficit.