Ksh 2.79 Trillion budget: Where is the money?

Further to bridge the deficit, National treasury will be forced to borrow from the external and domestic market an estimated Ksh 347 billion and Ksh 493 billion respectively.

This, implies that Kenya’s public debt environment is likely to worsen with a high risk of defaulting on repayment of its external debt.

The economy has been hardly hit by Covid-19 disruptions, locust invasion and flash floods that continue to wreak havoc across the country.

The 2.79 trillion shillings has been termed as ambitious with ordinary revenue expected to decline in the FY2020/21 due to the impact of Covid-19 pandemic on the economy that include closure of business over losses accrued due to diminished demand in the value chain.

In his maiden budget presentation Treasury CS Ukur Yattani stated that the taxman has to scale up capacity and rise to the occasion with a target of 1.89 trillion shillings in ordinary revenue.

To boost revenue collection the Yattani appealed to members of the National Assembly to support  and pass the proposed finance bill 2020 that contains various tax measures  including re-introduction of 14% VAT on liquefied gas and introduction of digital service tax to aide replenish governments’ coffers.

Yattani further hinted at a review in tax measures, laid out by the government to cushion Kenyans against the biting effect of Covid- 19, stating that government stands to miss out on 172 billion shillings in revenue if the measures are implemented long term.

“Kenya Revenue Authority has undertaken various reforms to enhance revenue mobilisation. We shall continue to support and strengthen the capacity of Kenya Revenue Authority to enable them collect revenues to fund Government programmes,” said CS Yattani.

He said the 2020/21 budget targets revenue collection including Appropriations-in-Aid (AIA) of Ksh 1.89 trillion, equivalent to 16.8 percent of GDP, a stagnation from the estimated revenues of Ksh 1.89 trillion, equivalent to 18.6 percent of GDP in the financial year 2019/20.

Of this, ordinary revenues in the financial year 2020/21 are projected at Ksh 1.63 trillion, equivalent to 14.5 percent of GDP.

The country has been driving on the wheels of debt with the total national debt as at January 2020 standing at 6.2 trillion shillings.

The CS noted that the debt burden is projected to decline over the medium term in line with the fiscal consolidation plan under implementation.

“Government is committed to implement the 2020 Medium Term Debt Strategy which recommends a shift towards concessional external borrowing and lengthening of maturity structure of the domestic debt,” said Treasury CS.

Adding that, “the Debt and Borrowing Policy approved in early 2020 will guide management of public debt.”