Treasury CS Yatani raises 2020/21 budget to Ksh.2.9trillion
Treasury Cabinet Secretary Ukur Yatani is expected to submit a revised Ksh.2.92 trillion 2020/21 supplementary budget for approval by the National Assembly after raising budget estimates for the year from Ksh.2.79 trillion.
The higher spending indicated in the final Budget Review and Outlook Paper (BROP) published on the National Treasury website at the weekend is largely attributable to increased allocations to development projects for the year.
While revenue collection shortfalls have indicated the need to trim spending, the National Treasury has proposed to raise allocations to development to Ksh.675.2 billion from the originally approved Ksh.589.7 billion.
Recurrent expenditure are expected to trend marginally upwards by Ksh.17 billion to Ksh.1.844 trillion,
Similarly, allocations to Counties are set grow to Ksh.395.2 billion from Ksh.369.2 billion after the exchequer carried forward arrears amounting to Ksh.26 billion from the units equitable share in the last financial year.
Ksh.1 trillion loans
The higher budget comes against declining revenues by government signalling higher than originally planned for borrowing.
To plug the shortfall in collections, the National Treasury is expected to borrow a high of Ksh.1 trillion in the financial year to June 2021 to fill the financing hole estimated at 8.9 per cent of GDP.
Net foreign financing is projected at a new figure of Ksh.401.8 billion from Ksh.346.8 billion to include a new Ksh.150 billion loan facility from the World Bank Development Policy Operations (DPO) and Ksh.249.1 billion in project specific loans.
On the domestic front, Treasury is expected to borrow a net Ksh.600 billion shillings from the originally planned Ksh.494.3 billion shillings.
The ambitious spending has seen the Treasury turn the screw on the Kenya Revenue Authority (KRA) by reinstating ambitious targets for the tax man.
While Treasury had eased the burden on KRA by lowering targets to Ksh.1.523 trillion in the draft BROP, the subsequent spending raise has seen the targets raised to Ksh.1.602 trillion- a near par with the originally approved Ksh.1.634 trillion.
The new targets are expected to mount pressure on the tax man who has struggled to raise tax revenues as various revenue heads shrink from the ongoing tough operating environment which has seen business close shop and employees laid off.
For instance, KRA tax collections through the first quarter of the 2020/21 fiscal year were down 15 per cent at Ksh.317.7 billion in comparison to Ksh.372.3 billion last year.
The newly published budget estimates are expected to raise credibility questions from both economists and the National Assembly as the National Treasury carry’s on its trend of raising spending against falling revenue sources.
In the last financial year, CS Yatani introduced a record three supplementary budgets including on in the final week, with all estimates raising spending against observed revenue shortfalls.
The trend dents the much publicized fiscal consolidation plans which if adopted would shrink Kenya’s appetite for debt by trimming spending.