The Cabinet Secretary for Treasury Henry Rotich read his budget statement on 13 June 2019. In his speech, he highlight a number of issues. In this article, we summarize those issues. The theme of Financial Year 2019/2020 is: Creating Jobs, Transforming Lives – Harnessing the “Big Four” Plan.
Economy
According to the Treasury CS Henry Rotich, the economy grew by 6.3 percent in 2018. He further, stated that this is the highest economic growth rate for the last 8 years.
Pending Bills
The National Treasury reported that they have reviewed the existing pending bills and Ksh. 10.9 billion has been set aside for paying those pending bills before the end of June.
Biashara Kenya Fund
Treasury CS Henry Rotich has consolidated Youth Enterprise Development Fund, Uwezo Fund and Women Enterprise Fund into one Fund to be known as Biashara Kenya Fund. The new fund will prioritize the needs of people living with disabilities, women and youth.
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In addition to the new fund, Treasury CS Henry Rotich reported to the house that Stawi loans was launched to provide unsecured loans to small enterprises.
Ajira Digital Program
Treasury CS Henry Rotich reported that Ajira Digital Program which aims at developing skills of one million youths to be able to work as freelance workers is on course. However, he proposed that the youth registered under the program will now be required to pay Ksh. 10,000 for “the next three years in lieu of income tax with effect from 1st January 2020. That way according to Treasury CS Henry Rotich, the youth registered will be exempted from regular taxation for the three years.
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The money paid (Ksh. 10,000) will be deposited into the Ajira Fund which will promote the growth of entrepreneurs who create digital jobs for Kenyans. Treasury CS Henry Rotich has set aside Ksh. 1 billion to be used as seed capital for the fund.
Starting from 1 July, 2019, all government spending agencies have been directed to give preference to local companies or business entities which assembly their motorcycles and motor vehicles here in Kenya. This will have an impact on the growth of local industries and therefore create employment for Kenyans.
Delayed payments of suppliers and vendors
Following numerous payments made to the National Treasury about delayed payments for suppliers and vendors, now amendments on the Competition Act have been proposed by Treasury CS Henry Rotich to compel the National Government, counties and other spending agencies to pay their vendors and suppliers within a period of 60 days. This is a serious issue considering that many counties have colossal pending bills running into billions of Kenyan shillings.
The Cabinet Secretary direct all county governments to make sure their pending bills are cleared as well as complete all the ongoing projects before starting new ones.
Zero-Based Budgeting
Treasury CS Henry Rotich reported that the National Treasury had adopted zero-based budgeting process in order to do away with expenditures which are not necessary or priorities. To reinforce that, the national treasury has also reinforced the “no new projects” in order to complete the ongoing projects.
Ballooning Wage Bill
Treasury CS Henry Rotich noted that the public wage bill has been ballooning and leaving little resource for development projects. He made a number of proposals towards containing the ever growing wage bill.
First, he proposed that the retirement age which is currently at 60 years should not be extended. That way those who are planned to retire will exit the workforce.
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Secondly, recruitment will now be restricted to key technical staff only. This means no employment of people who do not have serious technical skills to bring to the table. Therefore, in my interpretation, we will see personnel such as doctors, economists, engineers, nurses, security personnel and teachers being employed.
Third, the Treasury CS Henry Rotich proposed that the wage bill can be reduced significantly through cleansing of state workforce to get rid of ghost workers.
Domestic and International Travel
The cost of domestic and international travel has also been increasing and now the CS Treasury is proposing of introduction of electronic cards system to be issued to all public officers who travel in Kenya and abroad. The cards will be pre-loaded with DSA to be spent will on official duty.
Proposed amendment on Transport Policy
Treasury CS Henry Rotich informed the national Assembly that the Cabinet is preparing a new Transport policy with an aim of standardizing fleet management as well as use of fuel cards in all MDAs. This is expected to cut costs and improve efficiency.
The policy will also direct that all government vehicles have to be bought or procured from assembly plants based in Kenya.
Pension Reforms
Currently, there are 270,000 Pensioners in Kenya. The expenditure on pension has increased from Ksh. 25 billion in 2008/2009 to Ksh. 86 billion in FY 2018/2019. The government hopes to improve pension management through migration to IFIMS.
Domestic Revenue Collection
Treasury CS Henry Rotich expects to collect Ksh. 2.1 trillion as revenues from taxation and Appropriation-in-Aid (A-i-A).
Total expenditures are Ksh. 2.8 trillion leaving the government with a Ksh. 607.8 billion budget deficit. A budget deficit is the difference between government expenditure and revenues.
The budget deficit will be financed by external borrowing from World Bank, IMF, international financial institutions to a tune of Ksh. 324.3 billion and domestic borrowing from local banks, government bonds, and securities among other instruments to a tune of Ksh. 283.5 billion.
Public Debt
Treasury CS Henry Rotich reported that the state is paying its debts faithfully and there are no debt arrears. He further added that public debt is within sustainable levels.
According to Treasury CS Henry Rotich, the Public Debt Management Office at the National Treasury has been strengthened and is led by the Director General.
Transfer to Counties
The National Treasury reported that the 47 Counties in Kenya will receive a total of Ksh. 371.6 billion in FY 2019/2020. Out of this, Ksh. 310 billion will be equitable share while Ksh. 61.6 billion will be in form of conditional grants and development partners.
As you may be aware the Mediation Committee which consists of members from the Senate and the National Assembly had failed to reach an agreement prior to the budget reading. The National Assembly’s proposed Ksh. 310 billion carried the day despite the Senate having proposed Ksh. 335 billion to be allocated to the Counties. Once again, this proves that the Senate does not have powers as we initially thought. The opinions, proposals and suggestions from the Senate were just brushed aside as if they did not matter. Devolution is at stake and there is an urgent need to restore the power of our Senate as soon as possible.
Treasury CS Henry Rotich said the following about County Transfers:
“I am well aware that the proposal I have outlined above on the Division of Revenue between the National and County Governments is subject to negotiations under the Joint Mediation Committee established by the two Houses of Parliament. We look forward to the speedy conclusion of the mediation process, which we expect to take into account the provisions of Article 203 of the Constitution.”
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