12 November 2012

Kenya: Treasury Picks Key Funding Areas Under MTEF

The Treasury is pushing for public spending to focus on economic growth, development, job creation, poverty reduction and the implementation of the Constitution in the coming Medium Term Expenditure Framework (MTEF) budget.

Speaking at the 2013/2014 MTEF budget sector stakeholders public hearings, Finance Minister Robinson Githae said specific projects identified by stakeholders as important for the medium term will be targeted.

Githae identified investments in infrastructure, education, health, security and economic competitiveness as a priority.

He added that they also need to continue to pursue the policy of eliminating wasteful expenditure while continuing with reforms across all levels of government to strengthen service delivery and achievement of programme objectives.

"A lot more needs to be done to tackle new forms of insecurity and terrorism; improve physical and ICT infrastructure; improve access to credit facilities and financial services; increase uptake of technology; develop comprehensive policies and regulate and institutionalise framework to implement the constitution," he explained.

"I am glad to note that in the course of prioritisation of programmes to be funded in the next MTEF period, these issues have been considered and I urge stakeholders to interrogate the various sectoral programmes with a view to ensuring that the issues are adequately addressed," he added.

The minister explained that the government is committed to pursuing policies and instituting measures to improve the investment climate in the country, in addition to implementing structural and legal reforms expected to improve competitiveness, while promoting overall productivity.

He revealed that the Cabinet has already approved the fiscal framework upon which the medium term budget will be based on, and added that the government will rationalize existing tax inventive, expand the income tax base and remove tax exemptions as envisaged in the constitution.

"To finance the envisaged expenditure, the government will maintain a strong revenue effort at 23-25 percent of Gross Domestic Product (GDP) over the medium term," he said.

"Measures to achieve this effort include tax compliance with enhanced administrative measures," he added.

Treasury PS Joseph Kinyua pointed out that while Kenya's economic growth remains resilient, the outcome of the first half of 2012 and the continuation of the global economic crisis call for caution in the growth projections.

"According to the latest International Monetary Fund forecast, the global economic recovery is expected to be weak, uncertain and vulnerable because of the legacy of the financial crisis and other factors," he said.

"As we formulate the next MTEF budget, we must appreciate the challenging environment under which we are operating. This calls for fiscal discipline in order to sustain a stable macroeconomic environment, and we will endeavour to prioritise and rationalise our planned expenditures to create savings for the critical expenditures with high impact on the well being of Kenyans," he added.

The quarterly GDP data released by the Kenya National Bureau of Statistics in June 2012 indicated that the economy grew by only 3.5 percent in the first quarter of 2012 compared to a growth of 5.4 percent in a similar period in 2012.

Githae revealed that they expect real GDP growth to be 5.1 percent in 2012, representing a slight revision downwards from the 5.2 percent projected earlier in the year.

"The government is further committed to holding peaceful general elections and implementing the devolved system of government, which is expected to boost investor confidence and increase private investments," he said.

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