CS Yatani to present a smaller Sh2.74tr Budget plan
SEE ALSO :Uhuru and MPs make mockery of austerity“To achieve this target, the government will continue to restrict growth in recurrent spending and double its effort in domestic resource mobilisation,” reads part of the Budget statement. The fiscal deficit has been narrowed by Sh88 billion, with the Treasury estimating that it will borrow Sh569.4 billion in the next financial year. This is down from Sh657.4 billion that the country expects to borrow from both external and domestic investors by end of June this year. Net foreign borrowing is estimated at Sh247.3 billion down from Sh353.5 billion. However, domestic borrowing is expected to go up, with the government expected to borrow Sh318.7 billion in the next financial year compared to Sh300.7 billion that it expects to borrow from the local market in the current financial year. As part of his plan to avoid the risks that come with external loans, including exchange rate risks, Yatani seems to be moving towards the local debt market.
SEE ALSO :Governors generous with salaries: ReportBut it was the share of domestic debt that grew the fastest during this period. Debt from local investors –banks, insurance firms, pension schemes and individuals – increased by Sh115.5 billion between July and October 2019. Unfortunately, the Treasury boss’ Budget trimming measures might come at the expense of development expenditure. Expenditure on capital-generating projects such as roads, bridges, ports and power networks will reduce by 21 per cent, with the government pumping about Sh567 billion into development activities. This is a significant drop from the Sh730.8 billion that the government expects to spend on development in the current financial year. The government has been undertaking a raft of austerity measures, including freezing all new development projects until ongoing ones are completed. State corporations also have to consult their line ministries and the Treasury before recruiting new staff and acquiring ICT-related software, hardware or equipment and installations, according to a new circular Yatani issued. “State corporations should, as a matter of priority, enhance cost control measures with the aim of delivering services in the most cost-effective manner. Chief executives of State corporations are reminded that incurring expenditures that are not approved by their parent ministry and the National Treasury and Planning is irregular and they will be held personally liable for such expenditures in accordance with provisions of the Public Finance Management Act, 2012,” said the CS. Increasing fiscal constraints in concessional financial sources, as well as Kenya’s graduation to a lower middle-income economy, said Yatani in the draft BPS, has led to a slowdown in accessing concessional funding. Concessional funding is typically extended to vulnerable economies as it offers more favourable terms than market loans. “The cost of deficits financing and refinancing maturing debt has, therefore, remained higher since 2014 than in the previous years.” As a result, he said, the debt service burden will greatly benefit from fiscal consolidation, which will ensure the relative debt service is brought down in the medium term. “It is also expected that the country will restructure its debt portfolio by replacing expensive commercial debt with cheaper funds from alternative sources.” Further, ordinary revenues grew by 18.8 per cent in December 2019 compared to 10 per cent in December 2018, driven by strong growth in excise and income tax. [email protected]
Do not miss out on the latest news. Join the Standard Digital Telegram channel HERE.