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Grand projects, hefty send-off perks as Sh3.3tr Budget unveiled

Treasury CS Ukur Yatani presents the 2021/22 budget to the National Assembly on Thursday, June 10, 2021 [David Njaaga, Standard]

Treasury Cabinet Secretary Mr Ukur Yatani today unveils a Sh3.3 trillion budget with a focus on grand projects and hefty send-off perks for politicians as ordinary Kenyans grapple with hunger pangs, expensive food and fuel and unemployment.

It is a document that the National Treasury has succeeded to conceal from public scrutiny, yet Kenyans’ problems are too glaring to be hidden.

From the same cash-strapped people, Mr Yatani targets to raise Sh2.14 trillion in taxes and turn to lenders to plug the deficit by borrowing Sh846.1 billion.

“We are looking at about Sh300 billion in additional tax revenue in the next financial year and that means there is no way we can doge the Finance Bill bullet,” said Churchill Ogutu, an economist at IC Group.

The budget is coming at a time many Kenyans have been saddled with debts — just like the national government itself— on the back of 73.6 per cent of Kenyan households reporting worsened livelihoods last year compared to 2019.

The country is currently experiencing the worst drought in more than five years, with aid agencies stating that three million people are in need of food aid.

Prices of commodities such as cooking oil, milk, sukuma wiki and bread continue to rise, cutting the value of money for workers and their households.

It is the same with petroleum products such as cooking gas, diesel, super petrol and kerosene which are retailing at record highs.

Pump prices could also get worse should Treasury get rid of the fuel subsidy programme that has served to soften the economic blow. Petroleum Principal Secretary Andrew Kamau in a recent TV interview warned that fuel prices could go up this month.

Kenyans are paying Sh134.72 per litre of super petrol in Nairobi. A litre of diesel is retailing at Sh115.6 while that of kerosene Sh103.54.

It could have been worse were it not for the government subsidising the fuel, drawing money from the Petroleum Development Levy (PDL) Fund.

The subsidy programme that has cushioned Kenyans is however to blame for the biting shortage being experienced in the country.

This is as oil marketing companies fight the government over the compensation of the margins that they have been foregoing at the pump to keep the fuel prices stable under the subsidy scheme.

Refilling a 13-kilogramme cylinder of cooking gas cylinder costs as much as Sh3,500 today, up from Sh2,000 early last year. The increase has been occasioned by the imposition of the 16 per cent VAT in July 2021.

Additionally, cooking gas was also affected by recovering world economies as well as the Russia-Ukraine crisis. These have resulted in the rise in the price of butane and propane (the crude oil by-products used in the production of Liquefied Petroleum Gas (LPG or cooking gas).

The two products have increased by about 40 per cent in the second half of 2021.

Yet, as part of its revenue-raising measures, the Treasury has indicated that it might go after the cash-strapped informal sector to cast its tax net wider, a move that could see it go after mama mboga and those in the jua kali sector.

The Kenya Revenue Authority (KRA), which has recently gained some notoriety for its newfound aggressiveness, will be combing for revenues from every possible corner, with its eyes now cast on the digital world and exempted goods and services, according to the Budget Policy Statement 2022.

Treasury will be tasking the KRA to collect Sh2.14 trillion as ordinary revenues, being Sh341.1 billion more than the Sh1.8 trillion that the taxman was tasked to collect in the current financial year.

Netting the additional revenue will be an uphill task for the taxman, in an economy that is still reeling from the shocks of the Covid-19 pandemic and a tumultuous global supply chain that has weakened the country's exchange rate, pushed up prices of wheat, fertiliser and fuel.

Official data shows Covid-19 storms claimed 737,500 jobs in 2020 as companies shut down or scaled-down operations in reaction to a fall in revenue. Recovery has not been as quick as the decline was.

The economic situation saw more than half of the households skip meals, forgo medical care and accumulate school fees arrears.

Some 43.3 per cent of households said they tapped into their savings for survival, 40.6 per cent cut their non-food budget, 38.9 per cent cut food spending, 22.1 per cent sold assets, and 29.6 per cent turned to loans.

Similarly, 54.2 per cent said they had had to forgo buying medicine or visiting a hospital compared to 35.7 per cent who were in this category two years ago.

Such deep budget cuts at household levels signal a nation where people are struggling to make ends meet, mirroring the situation in the national government which has been going for loans to plug budget shortfalls.

Mr Yatani reckons that “we are operating under tight resource constraints with the economy yet to recover from the adverse effects of the Covid” while on the other hand, the government is confronted with “significant expenditure demands.”

Drought remains a concern for the economy, with poor or failed rain likely to hurt agriculture.

The Famine Early Warning System Network (FEWSNet) has warned that a shortfall in rains that in some regions have failed for three consecutive seasons, would lead to poor harvests and food insecurity in many counties.

"In February 2022, the short rains harvest is expected to be up to 70 per cent below average following the poor and significantly delayed short rains in the marginal agricultural areas," stated the think tank in a report earlier this year.

According to FEWSNet, poor households have resorted to petty trade or donations from the State or non-governmental organisations to get by.

With the failed March-to-May long rains, food insecurity in the affected regions is only set to worsen in the coming months and consumers all over the country will have to contend with higher food prices.

According to the National Drought Management Agency (NDMA), Mandera, Marsabit and Wajir counties currently face severe vegetation deficits requiring immediate intervention.

Other counties including Baringo, Isiolo, Kwale, Laikipia, Samburu and West Pokot have moderate vegetation deficit that is also affecting livestock and dairy production. Up to 11 counties recorded poor pasture while in eight devolved units' livestock body condition was reported as poor.   ​