KQ and poll agency biggest winners in the mini-budget
Kenya Airways, the Independent Electoral and Boundaries Commission (IEBC) and petroleum firms are to receive billions of shillings in extra allocation, making them the biggest winners in the mini-budget tabled in Parliament by the National Treasury.
The supplementary budget, which points to more pain for taxpayers, will see Treasury increase total expenditure for the 2021/22 financial year by Sh126.3 billion to Sh2.07 trillion.
This will be a 6.5 per cent rise on the original estimates approved by the National Assembly in June 2021.
The mini budget will cater for the August 9 General Election preparedness, post-coronavirus pandemic-related government interventions, drought, settling pending bills, salary adjustments, Competency Based Curriculum infrastructure and changes in development partners-funded projects.
Priority expenditure
“Implementation of the 2021/22 budget continues to face challenges that include drought, Covid-19, security-related issues among others,” National Treasury Cabinet Secretary Ukur Yatani says in the document submitted to the House Tuesday.
“There is increased demand for additional priority expenditure, which poses a challenge to the implementation of the budget.”
The Ministry of Petroleum and Mining is one of the biggest winners after getting an additional Sh24.73 billion to stabilise fuel prices.
The move indicates the sensitivity of the government to mounting public pressure over the cost of living, with seven months to the General Election, even as crude prices continue to surge on the global market.
The government has kept fuel prices stable in the last four months by using the Petroleum Development Levy Fund, with the additional allocation expected to significantly boost the kitty that has run dry.
The IEBC is another big gainer in the supplementary budget after being given an extra Sh8.81 billion for election preparedness. The money will be used to procure election material like ballot papers and boxes as well as cater for the ongoing round of mass voter registration.
Struggling Kenya Airways (KQ) will get an additional Sh26.56 billion for restructuring.
In December, Mr Yatani informed the International Monetary Fund (IMF) that the government would take over KQ’s Sh93.4 billion debts.
He added that the government would also give the airline Sh53.4 billion in direct budget support in the financial year that ends in June 2022 and fiscal 2022/23.
Treasury has also prioritised education, with an additional Sh8.58 billion committed to public universities, which are sinking in debt.
The money will also go to the Higher Education Loans Board.
It also allocated an extra Sh2.65 billion for primary education to cater for school feeding.
The estimates show that the mini budget will see the overall fiscal deficit in the current financial year—including grants—rise by 0.6 per cent of the Gross Domestic Product (GDP) from the original projection of 7.5 per cent to 8.1 per cent.
The deficit, including grants, as approved by the National Assembly for the current financial year stands at Sh952.9 billion.
The figure will rise with the expected increased borrowing from the foreign market.
Overall spending and net lending have been revised from the original projection of 24.5 to 25.4 per cent of the GDP.
Total revenue estimates have been raised from 16.5 per cent of the GDP to 16.8 per cent to cater for the recurrent expenditure that has increased by 8.9 per cent, with the development budget up by just 1.9 per cent.
The Covid-19 vaccination drive has also been handed a boost after Treasury added Sh8.54 billion to buy vaccines with World Bank funding and an additional Sh1.3 billion to establish a vaccine plant.
The World Bank has cut Kenya’s economic growth projections for the year to 4.7 per cent, significantly lower than the government’s target of a 5.9 per cent attributed to slow vaccination.
Road network
The State Department of Infrastructure has also gained significantly after being added Sh7.3 billion for building and maintaining roads.
The allocation buttresses President Kenyatta’s heavy leaning towards infrastructure development, especially the upgrade of the road network.
This is also reflected in the Sh1.5 billion that has been added to the Treasury for the upgrade of the rail network, with Kenya Railways expected to rehabilitate the Longonot-Malaba and other lines.
The rail, marine and pipeline dockets were transferred to the National Treasury last year.
The Defence Ministry got an additional Sh15.12 billion to bolster security and cater for salaries.
Meanwhile, the Ministry of Devolution has been added Sh1.2 billion to fight drought as thousands of Kenyans continue to suffer in arid and semi-arid counties.
The addition comes just a day after the National Treasury published draft regulations to set up a Sh3 billion fund to mitigate droughts, floods, fires, terrorism and other disasters.
The fund will be allocated cash annually through the budget, beginning with the 2022/23 financial year.
It will also appropriate funds from donors and well-wishers.
The increased government expenditure will see the public debt that stands at Sh7.5 trillion of the Sh9 trillion debt ceiling enacted in November 2018 rise exponentially, with an increase in net foreign financing that has been revised from the original projection of 2.2 per to 2.9 per cent of the GDP.
One of the biggest losers in the mini-budget is marine transport, whose allocation has been slashed by Sh15.04 billion.
The money has been taken from donor-funded marine projects, whose progress has been deemed too slow.
This made the Treasury to take their completion to the back seat of government spending priorities over the next few months.
Treasury has slashed the Agriculture ministry budget, reducing allocation for management of livestock resources by Sh1.29 billion and directing it to priority spending areas.
It cited low absorption of funds budgeted under the docket.
Fisheries Development and Management budget suffered a Sh2.85 billion cut while Sh1.8 billion for development of the blue economy was also taken away.
The State Department for Crop Development, however, got an additional Sh3.82 billion to support tea, coffee and sugarcane farmers.
It is good news for Micro, Small and Medium-Sized Enterprises (MSMEs) as the government’s net domestic financing has been revised from the initial projection of 5.3 per cent to 5.2 per cent of the GDP.
This means the government will not crowd the local domestic lending market, leaving it to the MSMEs for credit in line with the undertakings it made in 2018 as it pushed for the enactment of the Sh9 trillion debt ceiling.
But even as Mr Yatani sought the approval of the House, he added that some of the budgetary adjustments have programmes exceeding the 10 per cent limit as provided for in the Public Finance Management (PFM) Act.
“We in this regard request for special approval of the expenditure adjustments which are beyond the 10 per cent threshold,” the minister says, citing rule 40 (9) of the PFM regulations, 2015.
A need has arisen
The supplementary budget is in line with Article 223 of the Constitution.
It provides that the government may spend money that has not been appropriated if the amount appropriated for any purpose under the Appropriation Act is insufficient or a need has arisen for expenditure for a purpose for which no amount has been appropriated by that Act.
The Constitution also provides that post facto approval must be sought in the National Assembly within two months of the first withdrawal of the amount.
Parliamentary Budget Office in its 2021 Budget Policy Statement projected that Kenya’s public debt could surpass the Sh9 trillion limit by June 2023.
The debt, which stood at Sh7.71 trillion in June 2021, could hit Sh8.8 trillion and Sh9.8 trillion a year later.
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