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Yatani delivers safe exit Budget for Uhuru, avoids major tax measures

Kenya's Finance Minister Ukur Yatani presents the Government Budget for the 2022/23 fiscal year inside the Parliament buildings in Nairobi, Kenya on April 7, 2022. [Reuters, Monicah Mwangi]

National Treasury Cabinet Secretary Ukur Yatani yesterday presented a Budget that tried to avoid antagonising an already enraged public grappling with high cost of living, in what might have just offered his boss, President Uhuru Kenyatta, what appears like a safe and quiet exit as his term nears end. Significantly, Mr Yatani steered clear of announcing major new tax measures in what was aimed at avoiding a political fall-out as the country prepares for a transition election.

The Sh3.3 trillion Budget did not deviate significantly from the others  in the last 10 years, with a lot of money going into legacy infrastructure projects, the Big Four Agenda, security and education.

Mr Yatani targets to raise Sh2.14 trillion in taxes and plug the deficit by borrowing Sh862.5 billion.

“We have re-prioritised public spending towards pro-poor expenditures in health, education and supporting the vulnerable segment of the population,” said Mr Yatani in a speech that was delivered in a half-empty Parliament.

Recurrent spending was allocated Sh2.2 trillion and development Sh370 billion while counties will get Sh370 billion. 

New taxes would not have sat well with a citizenry grappling with drought, high consumer prices and expensive fuel. 

Instead, Mr Yatani has proposed to increase allocation that he hopes will reduce the pangs of hunger and offered more tax incentives to stimulate critical sectors of the economy, such as agriculture.

As part of the Government’s third economic stimulus programme, which includes Kazi Mtaani, credit guarantees and a number of subsidies, measures to revitalise the economy were allocated Sh30.1 billion.

Education was the biggest beneficiary, getting Sh544.4 billion, money which, besides going towards paying teachers’ salaries, will also be used to implement the Competency Based curriculum (CBC) and to build new classrooms for learners transitioning to Junior High School.

Roads, railways, bridges and ports will get the lion’s share of the Sh715 billion development kitty after Mr Yatani allocated Sh212.5 billion to these infrastructure projects, with the Standard Gauge Railway (SGR) getting Sh18.5 billion. Another project that got money is the Bus Rapid Transit (BRT), which was allocated Sh1.1 billion.

The Big Four Agenda, through which the President hopes to make available affordable houses, increase food production, offer universal healthcare and create decent jobs through industrialisation, received Sh146.8 billion. Health received Sh146.8 billion with a large allocation to universal healthcare.

Except for some products, which Mr Yatani said would be slapped with 10 per cent excise duty, the CS played safe by extending a number of incentives, such as allocating more money to the fertilizer subsidy in light of the high price of the input which has pushed up the cost of farming at a time when the country is grappling with drought, unrest in the global market and Covid-19 pandemic aftershocks.

Similarly, Boda boda and Tuk-tuk operators will have to dig deeper into their pockets after the CS made it mandatory for them to pay insurance for their passengers.

While this hits the low-paid motorbike, it is a policy that bodes well with the public given that Boda bodas have been a leading cause of road crashes, contributing to a large number of deaths and injuries.    

Also on the losing end will be companies with tax disputes against the Kenya Revenue Authority (KRA). They will now be expected to deposit half of the disputed amount in a suspense account at Central Bank of Kenya (CBK) until their cases are resolved.

Mr Yatani also introduced excise duty on all forms of advertisements for gambling, gaming and alcohol industry, areas that in the last 10 years have been President Kenyatta’s tax cash cows. ​

Besides the tax measures, the CS also did not hide the fact that this was a legacy Budget, consistently comparing the country’s economy today and 2013 when Jubilee Party rose to power. One of the party’s fiercest critic-turned-ally, Mr Raila Odinga, was in the House when the Budget statement was read. Neither the President, nor Deputy President William Ruto were in attendance.

On the economy, Mr Yatani noted that the country had “achieved monumental milestones,” growing the size of the national cake by 155 per cent between 2013 and 2020. The value of the country’s economy, technically known as Gross Domestic Product (GDP), increased from Sh5.3 trillion to Sh13.5 trillion in 2022.

Mr Yatani also said that poverty prevalence rate declined from 36.1 in 2013 to 33.6 per cent in 2019. He did not give the figure for 2022.

From new tax measures, Mr Yatani expects to collect an additional Sh50.4 billion.

The Budget Statement came earlier this year - not the traditional June 13 as is the tradition in the East African Community trading bloc - due to the election calendar as a result of which MPs will be going for a recess in June ahead of polls.

Ms Faith Okoyo Atiti, senior research economist, noted that the government might have wanted to manage the debate tonight by playing safe, which the CS did.

“You have to play with the people’s emotions. It is typical when you have something under wraps and you want don’t want it to blow,” she said.