Budget: Time to tame our huge appetite, live within our means

One area we have failed as a country to contain is our huge appetite to spend more. To spend, in many instances, what we don’t have. Once again, Treasury Cabinet Secretary Henry Rotich has kept the Budget estimates very high.

On Thursday, Rotich will explain to Kenyans how he plans to fund the Sh3 trillion 2019/2020 budget at a time when the economy is not doing well. Many businesses are bleeding after they failed to secure credit in the interest rate cap environment.

And the move by both the national and county governments to hold on to pending bills estimated at about Sh200 billion has denied businesses the much needed working capital.

Some businesses, especially Small and Medium Enterprises (SMEs) that had taken loans to complete government contracts, are yet to be paid. This has seen some entities collapse, cut jobs and others auctioned – putting more strain to the economy.

At the household level, many families are struggling to put food on the table after the cost of basic commodities went through the roof. To finance this budget, Kenya Revenue Authority (KRA) would have to up its game.

However, options are limited under the current economic environment. In the 2018/19 financial year, for instance, Treasury has set out to raise about Sh1.69 trillion in tax revenue.

However, as at April 30, KRA had raised Sh1.16 billion. Assuming that the taxman collects on average Sh116 billion per month, it may manage about Sh1.39 billion by the end of June. This means that it may fail to meet the revenue target, again.

Imposing new taxes have proved counterproductive in the past. Already, Kenyans are yet to recover from the move to impose an eight per cent tax on petroleum, including Kerosene, which is mostly used by the poor.  

Still, even with the high tax revenue targets, Kenya is left with a Sh630 billion hole that Treasury will most likely fill using loans and grants, swelling our already worsening debt levels. Currently, Kenya is spending more than half of tax revenues to settle debt. This is not good news. Essential social sectors such as healthcare and education are deprived of the much needed funds when most of the revenue is dedicated to salaries and repayment of debt.

Once again, it is clear that as a nation, we are living beyond our means. Treasury needs to be realistic with its spending proposals and come up with budgets that the economy can afford.

A few years ago, the government introduced austerity measures and said it would reallocate funds to essential projects, but this appears to have been abandoned. There was also a directive to stop funding new projects but from the budget estimates, some ministries and departments have still been allocated money for new projects.

In some cases, previous projects are yet to be completed or some have stalled.

There is need to make government expenditure more efficient and cost effective — meaning taxpayers get better value for money. At the moment, there is a lot of wastage and rampant corruption that needs to be contained. Furthermore, with the change of guard at Times Tower after James Mburu was appointed KRA Commissioner General to replace John Njiraini,there’s hope in the long-term to improve revenue collection.

Currently, hundreds of employees at KRA are in court over corruption claims. This does not augur well for the economy. That’s why perhaps we have not been meeting revenue targets. Screening and vetting of employees may help weed out thieves.

The ongoing measures to contain graft and automate revenue collection at the tax agency are welcome. Also, KRA must be more efficient and effective and that means broadening the tax bracket. A very large portion of the economy is working outside the tax bracket.