How Rotich’s budget claws back the gains of devolution

Treasury CS Henry Rotich read the 2018-2019 Budget at Parliament. [Standard]

The ancient Roman thinker, Cicero said “The national budget must be balanced. The public debt must be reduced; the arrogance of the authorities must be moderated and controlled.

Payments to foreign governments must be reduced. If the nation doesn’t want to go bankrupt, people must again learn to work instead of living on public assistance”.

2000 years later, true to his words Rome fell and we haven’t learned. Sh3 trillion is no small money.

If you were to divide it among the 30 million Kenyan adults, each would get Sh100,000. In principle, would the goodies in the budget benefit every Kenyan? Treasury Cabinet Secretary (CS) Henry Rotich recently read out Sh3 trillion budget proposal.

According to the Constitution, his presentation was merely a long list of suggestions as Parliament holds the final say on what the country should spend on. This decision is hinged on many factors and demands.

All government decisions are driven by the Vision 2030, a blueprint set to make Kenya a middle-income country by 2030. The blueprint spells out the political and socio-economic aspirations of the country. The vision is further broken down into five-year mid-term plans that run concurrent to the political calendar.

President Uhuru Kenyatta’s administration is betting on the Big Four Agenda as its mid-term plan. The plan aims to deliver 500,000 housing units, 800,000 jobs via manufacturing, 100 per cent food security and universal health coverage.

Budget policy

The plan was launched in early 2018. These two plans, incongruent with ministerial strategies and other key documents are then synthesised into the budget policy statement that guides both the national and county governments in budgeting for the next financial calendar.

The document is what drives the agenda for the Division of Revenue Bill, from which the CS draws mandate to submit budget proposals to the joint sitting of parliament.

Therein lies the first problem with this year’s budget reading; parliament has not agreed upon a Division of Revenue Bill. As such, CS Rotich’s proposals have no legal basis and could as well be dismissed as wishful thinking, spiced with ministerial grandiose.

Moving forward, a government shutdown should affect both the State and counties. CS Rotich speculates the economy will grow at 6.3 per cent in the coming year with stable macroeconomic indicators.

This is going to be difficult with a demonetisation programme expected to fail and weaken the shilling.

Agriculture has been touted a source of growth but might disappoint with unsatisfactory rains this year. The service sector holds more promise as a source of growth, purely because of the tenacity of Kenyans.

It is projected that the tax collector will reap Sh1.8772 trillion in the year, comprising 16.5 per cent of the GDP.

However, in the past years, the gap between the projected and actual income has been growing steadily, with fingers being pointed at the staff of Kenya Revenue Authority with claims of corruption and leakages.

The actual figure might be lower by at least 20 per cent lower.

The Sh3 trillion budget’s biggest expenditure item is education with over Sh470 billion, to facilitate free primary education, technical training, and university financing, shared among over 40 institutions of higher learning.

Public administration

Never mind the fact that county governments also budget for education at the early childhood development centres under their mandate.

Energy and infrastructure follow with Sh406 billion while public administration and international relations get Sh270 billion.

Budget reading is meant to reassure the public that everything is alright and present the government’s intentions in a way the public will find appealing. The CS did a good job of reassuring the public that our debt levels are sustainable, and he intends to borrow some more.

The projected fiscal deficit during the financial year is Sh629.9 billion, which is 5.6 per cent of GDP.

To finance this, Treasury will borrow Sh584 billion.

Total public debt is at 5.1 trillion, comprising 68 per cent of GDP.

While our debt to GDP ratio is at 56.2 per cent, borrowings in the next financial year might push it to 60 per cent, way beyond the IMF recommended levels of 40 per cent for developing nations.

In all its glory, the 2019 budget seemed to claw back on the gains of devolution. Progressively, Treasury has been reducing budgetary allocations to the counties.

Sh310 billion is set to be shared among 47 counties. This is merely 11.4 per cent of the total budget. The State is still keen on holding resources at the centre - denying counties the cash or merely delaying them.

For instance, why does the Ministry of Health need Sh93 billion, yet it’s merely a policy house with implementation happening in counties.

The centralised procurement at MoH has proven to be susceptible to corruption. The Constituency Development Fund functions overlap those of counties. Giving a new name does not cure the obvious reality.

The 2019 budget seeks to entrench the resources at the centre and derail devolution. Sadly, a centralised economy rewards cronyism and a third of that money will end up in private pockets as bribes and kickbacks.

-The writer is the CEO of Elim Capital Ltd

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