Subsidy debts, cheap fertiliser take lion's share of Ruto's mini budget

President William Ruto takes a Penalty ,during the launch Police Sacco Stadium on February 3, 2023 at CID Training school in South C in Nairobi. [Edward Kiplimo,Standard]

Paying for the subsidies that the Jubilee administration offered Kenyans in its dying days as well as fulfilling some of the Kenya Kwanza promises are some of the key features of William Ruto's first mini budget released this week.

The settling of debts owed for maize flour and petroleum subsidies as well setting up the Hustler Fund and implementation of the fertiliser subsidy have come top of the Supplementary Budget that the National Treasury unveiled Tuesday.

In the budget, Treasury increased allocation to the Ministry of Petroleum by a hefty 170 per cent, with the additional money expected to settle government's debt to oil marketing companies.

The firms, which gave up their margins to keep prices of fuel stable, have been going for months before government compensates them.

The Petroleum ministry's allocation has grown to Sh66.4 billion, an increase of 170 per cent from Sh24.6 billion it had been allocated in the Jubilee administration's last budget in July.

The higher allocation is expected to enable the government to pay oil marketers their dues for keeping pump prices stable.

"This reflects an overall net increase of Sh41.7 billion mainly on account of additional funding of Sh42.7 billion for Oil Market Price Stabilisation in the current expenditure and a reduction of Sh801.4 million in capital expenditure due to rationalisation," said Treasury in the mini budget.

The Petroleum ministry was a standalone ministry during the crafting of the budget for the 2022-23 financial but has since been merged with that of Energy.

Oil companies have since April 2021 been foregoing their margins when selling petroleum products to motorists, which cushioned consumers from high fuel costs.

The companies would then be compensated by government from the Petroleum Development Levy Fund, but the payment was often delayed due to scarcity of money.

The fund, from motorists who pay Sh5.40 per litre of diesel and petrol whenever they fuel, did not have adequate money.

The government in September did away with subsidies for petrol and scaled down on the subsidies for kerosene and diesel.

Aside from the Petroleum ministry, the other major gainer was the State Department of Crop Development and Agricultural Research, whose allocation was increased to cater for the previous maize flour subsidy as well Kenya Kwanza's fertiliser subsidy.

The department has received an additional Sh25.1 billion to Sh66.6 billion from Sh41.5 billion.

It will get an additional Sh3.6 billion in its recurrent budget, pushing it to Sh18 billion, with Treasury noting the additional funds would partly be used to cater for money spent in an attempt to give Kenyans cheap maize flour during President Uhuru Kenyatta's final days in office.

The development budget has been increased by Sh21.5 billion to Sh48.6 billion to cater for the current regime's cheap fertiliser programme.

The previous government's maize flour subsidy, which was expected to bring down the retail cost to Sh100, never really took off but nevertheless left the government indebted to maize millers who had taken their products to the market at lower prices.

President Ruto made it clear that his administration would not continue with the subsidy and would instead subsidise production through cheaper fertiliser.

In the supplementary budget, Treasury noted that the increased allocated to the Agriculture ministry would cater for the two subsidies, as well as a host of other changes within the ministry.

"The change in the current expenditure is on account of additional funds to cater for maize flour subsidy... the change in capital expenditure is on account of additional funds to cater for fertiliser subsidy for short and long rains, payment of sugarcane farmers arrears and maintenance of Nzoia Sugar Factory," it said.

The State Department of Early Learning and Basic Education received an increase of Sh17 billion to Sh128 billion, which Treasury said would be used to development Junior Secondary Schools.

The State Department of Cooperatives, which is charged with the implementation of the Hustler Fund (the Financial Inclusion Fund), has seen its allocation grow tenfold to Sh22 billion from Sh2.3 billion it had been given in the initial budget.

"The change in the current expenditure is on account of additional funds to cater for set-up costs for the Financial Inclusion Fund and rationalisation of expenditure, while the change in the capital expenditure is on account of additional funds for establishment of the Financial Inclusion Fund, and rationalisation of expenditure," Treasury said.

Ministries that suffered cuts include the Ministry of Energy, whose allocation was reduced by 43 per cent at a time when Kenyans are grappling with high cost of power.

The reduction is despite recent promises by high ranking government officials including Ruto that the State would increase investments in the sector to strengthen electricity supply as well as increase power production from cheap sources.

Treasury cut the allocation to the ministry by Sh41.7 billion from Sh95.7 billion to Sh54 billion, which it said was "on account of rationalisation of both current and capital expenditures".

Another big loser is the State Department of Interior and Citizen Services, whose budget has been slashed by Sh31.44 billion.

The department, charged with ensuring the security and safety of Kenyans, had initially been allocated Sh143.5 billion under Ukur Yatani's budget but this has been reduced to Sh112.1 billion.

Treasury said the reduction was on account of removal of some functions from the department.

The State Department for Infrastructure also got a 21 per cent cut, with its allocation going down to Sh174 billion from Sh221.3 billion.

"The decrease is mainly due to budget rationalisation," said Treasury.

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