The biggest gainer
The allocation to development projects, especially roads and energy, has grown steadily over years, setting the pace for future growth.
This year, the Government has allocated 20 per cent of the total budget to roads and energy from a mere 6.5 per cent of the total budget allocation in the previous Government. The allocation to roads and energy is five percentage points more than the previous government allocated overall in development expenditure.
By Jevans Nyabiage
As President Kibaki readies for retirement, the focus now shifts to the kind of leadership that will put the economic fundamentals right. The kind of leadership that will put the economy back on the growth momentum and shorten the gap between rich and poor.
Although the country has seen increased investment in infrastructure, the stark reality is that Kenya is facing a huge budget deficit, unstable macro-economic environment, and a large current account deficit.
Simply put, the country is living beyond its means as its imports far outweigh exports. It is challenging to finance current account costs, as Kenya devotes disproportionate amount of budgetary allocation to paying salaries to civil servants and servicing public debt.
Of the Sh1.45 trillion 20012/2013 Budget presented by the Finance Minister, Robinson Githae, recurrent expenditure will take a massive Sh1.003 trillion, and the rest will be used for development expenditure.
However, the total revenue estimate for the fiscal year 2012/13 is Sh956.9 billion, which means the Government will have to resort to borrowing to finance its operations.
“The Kibaki administration has accelerated infrastructure spend but has failed to cut recurrent expenditure. In fact, this year for the first time, the total projected revenue is less than the recurrent spend,” Aly Khan Satchu, Nairobi-based Investment Analyst, says.
The allocation to development especially to roads and energy has grown steadily over years, setting the pace for future growth.
This year, the Government has allocated 20 per cent of the total budget to roads and energy from a mere 6.5 per cent of the total budget allocation in the previous government. The allocation to roads and energy is five percentage points more than the previous government allocated overall in development expenditure.
Between 2003 and 2007, Kenya experienced unprecedented economic growth that was characterised by low interest rates and generally pro-business policies.
The economy that had sunk to 0.8 per cent by 2002 picked and rose to 7.1 per cent in 2007 only to be pummelled by post-election violence in a disputed presidential election in December 2007. It has not been promising since then. Most sectors of the economy were hit.
The economy is projected to grow by 5.2 per cent this year, but the fundamentals don’t support the rosy projections.
The rise of headline inflation to nearly 20 per cent October last year and the unprecedented weakening of the shilling in recent months have, no doubt, caused panic over the prevailing imbalances in Kenya’s economy.
To return Kenya to the growth momentum, economists argue that Kenya’s future lies in the private sector, and hence the need for the Government to push for policies that encourage investment.