Tough balancing act for Rotich to fund ambitious Budget

Treasury CS Henry Rotich during the opening of KIPPRA annual regional conference 2018 in Nairobi. [David Njaaga/Standard]
The 2018-19 budget will be a difficult one for Treasury Cabinet Secretary Henry Rotich.

The entire budget proposal data that he will be presenting today point to big cash deficit and Kenya may be forced to pay salaries from borrowed cash.

It is official, Kenya can no longer afford to run itself and will have to resort to borrow to pay salaries according to plans that will be laid out by Mr Rotich (right).

Treasury splits its expenses between recurrent expenditure, development expenditure, transfers to county governments and a contingency fund.

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Buried deep in the numbers is a sad reality that the expenses far outweighed revenues collection. This means the country will not have enough cash to pay basic salaries for its 600,000 plus civil servants.

If we are generous to Rotich and the Kenya Revenue Authority manage the uphill and almost impossible task of raising the targeted Sh1.7 trillion, then the CS manages to raise an additional Sh179 billion from Government fees, court fines and collection from ministries and parastatals in addition to grants by foreign partners estimated at Sh47 billion, the country’s budget will still be short of its planned expenditures.

With a recurrent expenditure of Sh890 billion a non-discretionary spend of Sh962 billion, Rotich will have an initial bill of Sh1.85 trillion to settle leaving him with Sh100 billion even before he pays counties Sh372 billion.

This means Sh272 billion will be borrowed and given to counties whose 70 per cent of income goes to recurrent spend.

“We will probably borrow to pay salaries because we have a very big deficit, development spending will take a hit also,” said Chief Operating Officer and IBC Director Kunal Ajmera.

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Rotich dismissed the numbers, saying that we had repeated an entry even though the numbers speak differently.

“Recurrent cannot be Sh1.8 billion, you must be double counting transfers to counties,” he said in an SMS to this writer. He did not reply when we clarified on the figure.

Development expenditure of Sh653 billion and contingency fund of Sh5 billion will be put on the back burner.

Alternatively, Treasury will carry on with last year’s policy of delaying release of counties funds which will mean that even at county level no development is conducted and Mr Kunal says they will just be "getting by" paying salaries.

Setting records

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“Counties are just like small national governments they are not raising enough revenues so development will not come from there. It is a very serious situation, people are not appreciating it,” Economist Robert Shaw said.

The fanfare that has met Treasury magical ability to continue setting records in the amount it spends from Sh1 trillion in 2012 to Sh3.1 trillion in just under six years could end up in a sour taste as a result of this precarious disparity.

Mr Shaw said delays in paying salaries would not be uncommon, with priority given to the uniformed forces as Treasury juggles erratic flow of cash against huge debt. The CS claims the taxman will raise Sh1.7 trillion, yet everyone and sundry agrees that it is too ambitious.

Budget committee chair Kimani Ichungwa said his team had observed that there were revenue shortfalls or under-performance. This was mainly attributed to over projection of revenue leading to shortfalls that are bigger than expected and more debt is procured. According to data compiled by The Standard, on average Treasury is usually short of its targets by six per cent and a steep average of 10 per cent over the past three years.

This means Rotich may only be able to raise Sh1.5 trillion, which will basically mean we can only fund half of our expanses.

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Follow the conversation about the Kenya Budget 2018/9 on @StandardKenya

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