The government has projected the economy to grow at 6.1 per cent in the first quarter of 2023.
And it is expected to maintain the momentum over the medium term.
Leading Indicators show a strong performance of the economy in the first quarter of 2023, reflecting robust activity in the service sector and also in the wholesale and retail trade, accommodation and food services, education and information and communication.
The World Bank recently forecast that Kenya’s economy will expand at 5.2 per cent and 5.3 per cent in 2024 and 2025 respectively.
Revenue collection is projected at Sh2.893.6 billion (17.8 per cent of GDP) in the FY 2023/24, an increase from FY2022/23 which stands at Sh2.528 billion, and is expected to rise further to Sh4,195.2 billion (18.3 per cent of GDP) by the FY 2026/27 an indication that the fiscal out turn is on an upward improvement.
The government projects that the expenditure will be at Sh3.599.3 billion (22.1 per cent of GDP) in FY 2023/24 this will include the recurrent expenditure will comprise Sh2.477.7 billion (15.2 per cent of GDP) and development of Sh689.1 billion (4.2 per cent of GDP).
On the deficit financing, the fiscal deficit is projected at Sh663.5 billion (4.1 per cent of GDP), in FY 2023/24 a reduction of more than Sh450 billion from FY 2022/23 which stood at Sh1.12 trillion (6.2 per cent of GDP).
Currently the fiscal deficit is estimated at 5.7 per cent of GDP having improved from 6.2 per cent in the previous year, owing to reduced borrowing, and expenditure reorganisation.
Total allocation to county governments is projected at Sh385.4 billion (23 per cent of total government revenue of the last audited accounts approved by the National Assembly) shareable revenue including other conditional grants to total Sh429.7 billion (25.7 per cent) compared to the FY 2022/23 of Sh370 billion.
Other additional allocations include Sh44.2 billion of conditional grants from the national government of which Sh33.2 billion foreign financed projects, Sh4.7 billion county Industrial parks, Sh5.9 billion for medical equipment services, Sh454 million for county headquarters and Sh108 million from the Judiciary.
The debt repayment for FY 2023/24 indicates Sh628 billion domestic debt interest, foreign debt interest Sh146 billion and guaranteed debt Sh17 billion.
It remains to be seen whether KRA will hit the target of the current financial year amid massive revenue decline.
Out of the total projected for the next financial year revenue, the national government is allocated Sh2,177.3 billion, meaning it will be left with about Sh927 billion to fund government programmes.
State House spokesman Hussein Mohamed, said the government has taken a value chain approach to budgeting and has committed Sh267.7billion in nine value chains which will mainstream the bottom-up economic transformation agenda in the FY 2023/24.
"The value chain approach allows mapping the production process throughout the value chain to the final market transaction. The resource allocation on the value chain approach to budgeting ensures efficiency by eliminating gaps and duplications," said Hussein.
The nine value chains include cotton to textile and apparel, edible oil crop production, dairy, leather and leather products, rice production, tea value, blue economy and fisheries, minerals and tree planting, construction and Building material.
In line with President William Ruto's pledge to strengthen and institutionalize Judicial independence, the Judiciary’s allocation has been increased from Sh18.8 billion to Sh22.9 billion in the next financial year.
Finance Bill 2023 proposes to remove VAT on tea purchased from factories or auction centres for the purpose of value addition for export, in line with Kenya Kwanza government manifesto.
In addition, there is a deliberate assessment of tax incentives required for domestic capacity of packaging materials to support value-addition for the tea export Industry.
To reduce the cost of liquefied petroleum gas (LPG) the Bill proposes to exempt LPG from VAT.
It further proposes to exempt LPG from Railway Development Levy (RDL) and Import Declaration Fees (IDF).
To support the local Industries and expand tax base, the Bill seeks to introduce excise duty on imported fish and imported furniture.