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Debt, salaries to get lion’s share of Sh3trn Budget

by biasharadigest

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Kenya will spend Sh3.02 trillion in the new financial year that starts in two weeks.

This is the biggest expenditure plan for the country since independence.

With the money, one can hire five million graduates in various sectors with a starting salary of Sh50,000 each and pay them salaries for a whole year.

If you were to use all this money to just build roads, it can comfortably build 100 Thika Roads all over the country.

The amount can fully fund the construction of about 10 standard-gauge railways like the one from Mombasa to Nairobi.

If you were to spend Sh30 million every day, it would take you 274 years to exhaust it. Shared among all the 50 million people in the country, every citizen would walk away Sh60,000 richer.

But that is not how the national budget works. The Treasury allocates the money to various departments and agencies. There is also a share for the 47 counties, the Judiciary and Parliament.

The rest goes to the Consolidated Fund Services (CFS), where it is used to repay debt and salaries of constitutional commissions.

In the 2019/20 financial year, whose budget will be read Thursday, the government will spend a total of Sh1.7 trillion to run its programmes, pay salaries and generally make sure all operations continue.

Counties will receive Sh371.6 billion, while the CFS has an allocation of Sh805.8 billion, the bulk of which will pay debts.

Parliament will receive Sh43.6 billion, the Judiciary will get Sh18.9 billion, while Sh5.8 billion will go to the equalisation fund.

Most of this expenditure burden will be shouldered by taxpayers, and the deficit will come from borrowing.

In the new year, the Kenya Revenue Authority (KRA) will have the almost impossible task of collecting Sh1.8 trillion as ordinary revenues.

About Sh300 billion will come from Appropriation in Aid, bringing the total projected collections to Sh2.1 trillion.

The levies that contribute most of this money include income tax, pay as you earn, value added tax (VAT) and custom duty. Most of the taxes are eventually passed on to the consumers of the end product in one way or another.

This year, the budget deficit will stand at Sh607.8 billion. Treasury hopes to plug this by borrowing Sh324.3 billion from the external markets and Sh289.2 billion will come from the domestic markets.

In total, it will therefore borrow Sh613.5 billion, which is over and above the budgeted for deficit by Sh6.5 billion.

It also hopes to collect Sh5.7 billion from domestic receipts.

Treasury Cabinet Secretary Henry Rotich will Thursday reveal just how painful funding this year’s budget will be.

With slow growth in revenue collections and frequently missed targets by KRA, he will be walking a tight rope as he balances between not hurting the goose that lays the golden egg with new taxes, and ensuring the government gets money to spend on its ambitious Budget.

Some of the quick hits to plug the deficit include increasing taxes on the sin industry that includes tobacco, alcohol and now betting.

Raising VAT to 18 per cent has also been on the cards for some time to be at par with the rest of the East African region.

Lavish expenditure on things like top-of-the-range vehicles, imports of manufactured goods as well as medium and small traders are also likely to be hit hard by the new tax measures given that the SME sector is the only one that has been growing and generating new jobs.

Other potential targets are the mobile loans industry, mobile money operators as well as online business. Landlords are also likely to face a new attempt to pull them into the tax bracket.

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