Kenya is in the process of formulating its over Budget Policy Statement (BPS) for the fiscal year 2021/2022. This is a document which contains 3 P’s and 1 C. What am I saying? The policy document highlights the PERFORMANCE of the national government in implementation of its budget in the current financial year. The second year stands for PRIORITIES. That means the document tells us what the national government will focus on in the coming financial year. The third P standards for PROJECTIONS. That is projecting the amount of resources that the national government will raise, how much they will borrow and how much expenditures will be done in the coming financial year. The one C stands for CEILINGS. The ceilings for each sector is set in the BPS.
Kenya’s financial year runs from 1st July every year to 30th June of the coming year. It is not the same as the calendar year. The nature of public budgets around the world is that any resources which remain unused are swept back into the consolidated fund found at the Central Bank of Kenya.
The draft budget policy statement has been released by the National Treasury of Kenya. You can now access a copy, read and make your comments/input in public forums which have been advertised already. As you prepare to give your input, remember to prepare written proposals and send them to National Treasury via email. This is important because not everyone among us will get a chance to make an oral presentation before the Members of Parliament.
Context
According to the BPS 2021, the global economy is expected to expand by 5.2 percent in 2021. There has been general observation that the national executive headed by President Uhuru Kenyatta is has replaced the Big Four Agenda with the Building Bridges Initiatives (BBI). After going through this draft, we will assess the truth in that statement. The beauty with statistics is that it does not lie, it is people who lie.
In FY 2021/2022, the national government is introducing new tax measures such as digital services tax on income generated from digital market places. This will be 1.5 percent of gross value of transactions made online.
The national government talks of accelerating the implementation of the Big Four Agenda in 2021.
According to the BPS, additional 1.6 million visits were made to the healthcare facilities during the last 12 months of Universal Healthcare Coverage piloting in Kisumu, Machakos, Isiolo and Nyeri. The UHC scheme will be managed by the National Hospital Insurance Fund (NHIF).
The national government is in the process of identifying 1 million households who are unable to pay insurance premiums to benefit from insurance cover. Further the national government plans to collaborate with the County Governments in order to achieve the objectives of Universal Healthcare Coverage.
According to the National Treasury, all the state sponsored schemes such as HISP OVC, Elderly, PWD, Linda Mama, Edu-Afya have been consolidated under UHC. This will now be called the UHC insurance scheme. Further, a UHC Fund has also been created to ensure the goals of UHC are achieved. The UHC regulations are now being formulated.
Under housing, one of the Big Four Agenda, 1,370 houses have been completed at Park Road in Nairobi. The house at Stone Athi and Mavoko are at different stages towards completion. The construction of 25,965 affordable housing units in Starehe (3,360), Shauri Moyo (4,470), Kibera Zone B (4,435) and Mukuru, Meteorological site (13,700) is set for commencement with the investors having already been identified.
Access to housing finance is one of the greatest challenges in Kenya considering that there are only 25,000 mortgages in Kenya. The second challenge is that the cost of land in Kenya is quite high.
Fiscal Consolidation
In the BPS 2021, the national treasury speaks of fiscal consolidation which is government policy to reduce budget deficits and public debt. However, from the actual practice, Kenyan government is always expanding the boundaries of public debt.
Exchange rates
Kenya Shilling to the dollar exchanged at Ksh 110.6 in December 2020 compared to Ksh 101.5 in December 2019.
Revenue Performance
Kenya had a target of collecting Ksh. 907.7 billion up to December 2020 but ended up collecting Ksh. 800.1 billion.
Expenditure Performance
For the period up to December 2020, a total of Ksh. 1,191 billion was spent. This was lower than the projected figure of Ksh. 67.9 billion. A total of Ksh. 129.5 billion was transferred to counties up to December, 2020.
In September 2020, Kenya exported goods worth Ksh. 6 billion with Kenya tea being in high demand in the United Kingdom. In the same month, Kenya imported goods valued at Ksh. 14.9 billion. In fact, in the period from July – September 2020, exports grew by 2.8 percent. During the same period imports declined by 7.3 percent due to decline in demand for imported manufactured goods such as machinery, vehicles and SGR related construction materials.
Net services declined by 72.8 percent for the year to Sep 2020. This was due to a large decline in transport services occasioned by travel restrictions. However, pundits have pointed out that transport of cargo performed very well during the period.
Up to Sep 2020, Kenya received Foreign Direct Investments (FDI) to a tune of USD$482.4 million. This is money brought into the country through investments by foreigners of our own sons and daughter abroad sending money to Kenya.
PERFORMANCE
The tax reliefs which were introduced in April 2020 were reversed effective from January 2021. These actions are likely to lead to a better performance for revenue collection.
Kenya’s performance on revenue collection was poor. For instance, from July – December 2020 Kenya collected Ksh. 726.4 billion which was a decline from 2019.
In terms of expenditure the national government of Kenya spent Ksh. 1,191 billion which missed the target by Ksh. 67.9 billion.
PROJECTIONS
Going forward the global economy is expected to rebound to 5.2 percent in 2021 which is good news considering that we had a contraction of 4.4 percent in 2020. The developing countries are expected to experience a 6.0 percent economic growth in 2021 from a 3.3 percent contraction in 2020.
Kenya’s economic growth is expected to slow down to 5.5 percent in 2022 due to the risks associated with the scheduled General elections.
Persistence in the spread of Covid-19 virus is a major risk staring at the Kenyan economy. This means that the economy is at the mercy of the pandemic.
PRIORITIES
According to the draft BPS, Kenya will focus on reviving the economy following the negative impact of Covid-19 pandemic outbreak and implementing the Big Four Agenda: housing, Universal Healthcare Coverage (UHC), manufacturing and food security.
The tweet below elaborates on how the government plans to promote manufacturing in order to increase the contribution to GDP and create jobs.
Second hand car models account for than 85% of the imported Fully Built Units (FBUs) in Kenya. Government of Kenya plans to phase out imported second-hand cars by 2026.
— Geoffrey Kerosi (@gkerosi) February 11, 2021
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