Ndung'u defends tax pain, seeks your help to lift up the hustlers

National Treasury Cabinet Secretary Njuguna Ndungu (centre). The Treasury CS wants KRA to collect more so as to fund ambitious Kenya Kwanza plan. [Samson Wire, Standard]

The Kenya Kwanza administration defended its controversial spending plan in Parliament that was marked by protests by opposition MPs who staged a walkout.

The Ruto government, under pressure to deliver on its rosy campaign pledges including bringing down the cost of living, said it needs time for its ambitious programmes to have an effect on the ground but also help from the private sector and foreign lenders to meet its massive public investment needs.

National Treasury Cabinet Secretary Njuguna Ndungu, while presenting the Budget Statement to Parliament on Thursday, defended the road map that also includes a mix of new controversial proposed taxes on various sectors.

He told Members of Parliament that government-proposed spending and tax measures will reboot the struggling economy which is battling record debt, and high energy and food prices.

"The Kenya Kwanza government has begun the journey to bring down the cost of living and improve livelihoods, while at the same time fostering a sustainable inclusive economic transformation," said the Treasury CS.

"The government has taken the long-term sustainable approach of subsidising the production of goods instead of consumption to respond to the rising cost of living."

"In this regard, the government has instituted immediate interventions aimed at providing short-term solutions to the high cost of living while at the same time building a momentum for long-term economic vibrancy and transformation."

The budget presentation programme was earlier marked by controversy after MPs allied to Azimio coalition staged a walkout in protest of the proposed budget.

The MPs led by Minority Leader Opiyo Wandayi booed the Treasury CS and walked out as soon as he started speaking.

Prof Ndung'u outlined how the government plans to spend Sh3.67 trillion over the next financial year which starts July 1.

To finance the budget, Treasury has proposed new or higher taxes to enable the Kenya Revenue Authority meet its plan to raise Sh2.57 trillion in tax revenues.

Treasury is also expected to borrow Sh718 billion to bridge the budget deficit.

The CS maintained the Kenya Kwanza administration will dwell on building the blocks of its bottom-up economic model.

Azimio MPs walked out just before Treasury CS Njuguna Ndung'u read the 2023/2024 budget estimates. [Elvis Ogina, Standard]

Dubbed the Bottom-up Economic Transformation Agenda, the model is expected to replace the Big Four Agenda championed by the previous regime.

"This agenda is premised on the need to address the challenges that the economy is facing, stimulate economic recovery, and bolster resilience while building on successes realised over time," said Ndung'u.

The previous Big Four Agenda was adopted as the fourth medium-term development plan for the country's Vision 2030.

The Ruto-backed bottom-up model is likely to inform the fifth medium-term plan that is currently under development.

Ndungu unveiled a Sh278 billion economic roadmap that he said would expand the economy by at least 5.5 per cent this year, lift barriers to investment, create jobs and bring down cost of living, while also tackling poverty and disease.

Prof Ndungu said more money would be pumped into sectors deemed as fast growing and expected to reboot the economy. These include agriculture, education, healthcare and housing.

He said the national budget is keen to revitalise productive sectors of the economy so as to lower cost of living.

The cost of living measure rate has remained above the 7.5 per cent upper bound target since June 2022, mainly due to high food and energy prices following adverse weather conditions and high global oil prices but also compounded by a pass-through effect from domestic currency depreciation.

The Ruto administration has opted for boosting efforts to grow more foods instead of subsidising food and energy a strategy adopted by the previous regime to cushion Kenyans.

President Ruto's administration, which took over last September, is under pressure to bring down cost of living and some of the proposed tax measures have been questioned by various interest groups.

But in making the budget, the Ruto government was seen to face pressure to find a balance between reforms to satisfy the global lenders such as the International Monetary Fund (IMF) and the World Bank and measures to win over and shield hard-pressed consumers from the cost-of-living crisis, analysts said.

"The cumulative IMF commitment to Kenya will amount to SDR 2.633 billion (about US$3.52 billion or Sh485.7 billion) by April 2025," said the CS.

The National Treasury. Citizens overwhelmingly presented submissions challenging contentious clauses in the Finance Bill 2023. [Samson Wire, Standard]

Ndung'u also said the budget proposals will promote fairness and equity in the financing of the national budget, ease the cost-of-living crisis and kickstart economic growth.

"Government fiscal policy for the FY 2023/24 and the medium-term budget aims at undertaking a growth-friendly fiscal consolidation plan to ensure debt sustainability," he said.

"This will be achieved through improved revenue collection, primarily through broadening of the tax base and containing overall expenditure to the target set while prioritizing high-impact social and investment expenditure."

He said as part of the economic turnaround plan, the government will scale up revenue collection efforts by the Kenya Revenue Authority (KRA) to Sh4.0 trillion over the medium term.

Ndung'u said the policy measures will strengthen revival of the economy whose outlook he noted is improving despite a second wave of global shocks.

"The economy is expected to rebound and expand by 5.5 per cent in 2023 up from 4.8 per cent in 2022 and maintain that pace over the medium term," he said.

"This growth will be supported by a broad-based private sector-led growth, including the continued strong performance of the services sector and recovery in the agriculture sector due to improved weather conditions during the March-May rain season."

"This growth outlook will be reinforced by the interventions being implemented by the Government under the Bottom-Up Economic Transformation Agenda."

Kenya's IMF programme entered a fresh phase recently while the World Bank has agreed on a multibillion loan programme with the Kenya Kwanza administration as Kenya grapples with record inflation, fiscal imbalances and low reserves.

Ndung'u pointed to the funds being crucial for Kenya to support the economy.

"That's why we are appreciative of the bilateral engagements," he said.

He allayed fears of Kenya defaulting on its debt obligations saying while there are elevated risks of Kenya's debt, it is still sustainable.

Ruto's administration has laid out plans for Parliament to replace current public debt limit of Sh10 trillion with a debt anchor hinged on the Gross Domestic Product (GDP).

Ndung'u beseeched Parliament to fast track replacement to enable the government deliver on its economic plan.