Treasury CS Henry Rotich is expected to table the State’s Ksh.3.02trillion budget projections on Thursday afternoon.
He will be bringing the government budget’s financing options to the table.
The budget policy statement is by now all figured out pending the crossing of t’s and the dotting of the i’s ahead of its presentation by the Cabinet Secretary.
Past budget-days have been preceded by pomp and color defined largely by an extensive build up.
However, sources close to the National Treasury expect the day will be marked with low-key deliberations as the Planning Ministry abides by its presentation of budget estimates as a mere formality.
This as Treasury adopts a modest approach amidst growing discontent of the State’s fiscal management.
Treasury has backed itself against all the odds to fast track fiscal consolidation for the sound management of State obligations to both its countrymen and creditors.
This even as the government remains wayward in its replication the self-initiated strategy.
Of the Ksh.2.7 trillion in the total expenditure allocation, Ksh.1.65 trillion makes for recurrent spend.
This makes for a direct contravention of Treasury’s medium-term debt management strategy (MTDS), primarily anchored on trimming cyclic expenditure.
In recognition of the widening rift in expectations, Amana Capital Chief Investment Officer Reginald Kadzutu equates the budget policy statement to an ordinary human resource payroll.
He further rubbished any declarations on economic impact.
“We have a complete directionless fiscal policy. We have a scenario where we are increasing spending and taxation at the same time.
This is equitable to pressing on your car’s accelerator and brakes all at once,” he said.
Budget day largely involves the declaration of new tax measures and supportive legislation to spur productivity, experts argue taxation as a budget financing tool has seemingly hit the ceiling.
This even as past tax reforms from the ending 2018/19 financial are yet to be fully incorporated.
Though there was support for expansion of the tax base to incorporate presumptive tax for small and medium enterprises (SMEs), ordinary revenue remains below its potential.
There is expectation of another shortfall in the collection even against a downward revision of targets to Ksh.1.4 trillion.
Rotich’s attempts to raise more revenue domestically were further frustrated by the discounting of both the robin hood tax and VAT on petroleum products with Parliament dialling back the charge on the latter to 8percent.
PwC Tax Director Titus Muko says the government has little room for manoeuvre in either direction pressed by the need to maintain fiscal discipline.
The majority of the population remains hard pressed by existing high taxes.
“The informal sector is already significantly taxed with excise duty and value added taxes being passed on along the chain. I wouldn’t think there is a pot of gold there.
“Further, with no significant decrease in expenditure and with stagnating revenue, the government is unlikely to give away anything through redemption, “he said.
New taxes may only come into fruition in the latter half of the year even as activists lobby the courts to bar Treasury from enforcing new taxes prior to the ascent of the Finance Bill into law.
Treasury’s Medium Term Debt Management Strategy advocates for the recalibration of the mix of debt to end in an 8:17 ratio between external and internal lending.
However, the 2019/20 budget policy statement is set off the rails of austerity.
Treasury is for instance expected to lend a total of Ksh.306.5billion from the international market against net domestic borrowing of Ksh.289.2 billion to plug the Ksh.607.8 billion budget deficit.
The Ministry further remains on an over-ambitious revenue mobilization target tasking the Kenya Revenue Authority (KRA) with raising Ksh.1.9trillion.
At the backdrop of the target is consistent misses of revenue targets over the years.
The play-out of an off-the-wall fiscal consolidation policy likely dents Treasury’s medium-term target of closing the budgeting gap to 3percent by the close of the 2021/22 fiscal year.
Kenya Business Guide analyst Sahil Shah however sees the debt mix as sound at this time but expresses jitters on domestic revenue mobilisation in the long run.
“While we see the current blend of external and domestic borrowing as prudent, we remain uncertain on whether the deficit can be reduced further through internal revenue,” he said
Kenyans are expected to tune to Rotich’s budget policy statement albeit frustrations on the direction of the country’s economic growth.
According to an opinion poll conducted in May, nine out of 10 Kenyans are dissatisfied with the country’s fiscal management.
Their biggest worry is the creation of jobs in the economy with graft being seen as the biggest obstacle to the attainment of economic transformation.
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