15 January 2014

Kenya: Robust Strategy Will Cut Spending - Rotich

Nairobi — The National Treasury is working on reducing spending in a bid to utilise more resources on development, job creation and strengthening of the private sector.

Speaking while launching the Medium Term Expenditure Framework's public hearing, National Treasury Cabinet Secretary Henry Rotich said that foreign trips will be limited and the number of government officers travelling out of Kenya on official duty will be reduced.

Rotich said business class flights for government officials will also be reduced while official meetings will also be restricted to government institutions.

According to Rotich, plans are also underway to centralise government advertisements to be managed by one ministry.

"It's becoming very difficult to manage every State agency's spending. We want to have it centralised in order to have better control and management and achieve huge savings; the talks are ongoing," he explained.

Plans are also underway to reduce the government wage bill from the current 50 percent of revenue to at least 35 percent.

"From July going forward the Salaries and Remuneration Commission has come up with a clear policy of reviewing wage increase in periods of four years. This will significantly reduce the wage bill," he revealed.

The three-day public hearing which started on Wednesday will see sector working groups present their budget proposals for their 2014/2015 Expenditure Framework so as to receive feedback from the public and stakeholders and validate the sector budget proposals.

All working sector groups are expected to present their budget proposal to the National Treasury by January 24.

This comes as the government underperformed in its cumulative revenue collection that stood at Sh460 billion in the first six months of 2013/2014 financial year compared to its target of Sh489.6 billion - a shortfall of Sh28.6 billion.

According to the Treasury, the deficit was in respect of Sh10.4 billion in ordinary revenue (inclusive of railway levy) and Sh18.2 billon in Appropriations-In-Aid (A-I-A).

"The underperformance in ordinary revenue was mainly reflected in excise and income taxes while the shortfall in A-I-A, partly reflects underreporting by line ministries," the Treasury reported.

Domestic financing as at end of December 2013 was below the target by Sh15.7 billion to stand at Sh67.4 billion compared to the target of Sh83.1 billion.

Expenditure execution has lagged behind in the first six months of the financial year on account of lower absorption of funds from external sources with recurrent expenditures above target by Sh25.3 billion.

Total expenditure (based on disbursement) amounted to Sh572.2 billion against a target of Sh685 billion - reflecting under-spending of Sh112.8 billion, of which Sh30.6 billion was in respect to lower than targeted disbursements to the counties, while Sh105 billion was in respect of development expenditure and net lending - domestically financed development expenditures were below target by Sh13.7billion, and those financed with foreign resources were below target by Sh90.3 billion.

"Even though performance in ordinary revenues indicate cumulative shortfall, the overall annual growth has been encouraging and we remain optimistic that the revenue target for FY 2013/14 will be met. We will continue to monitor closely revenue performance especially the VAT after the new law has taken full effect," reported the Treasury.

Written by KENNEDY KANGETHE // January 15, 2014 // 0

The Exchequer expects final data to show Kenya's economy grew by 5.1 percent in 2013 up from 4.6 in 2012 due to the improved weather conditions, easing of inflation, lower interest rates and a stable exchange rate.

The Kenya shilling exchange rate remains stable against major world currencies on account of increased short term capital inflows, remittances and Central Bank of Kenya activity in the foreign exchange market.

Average lending and deposit rates gradually declined to 16.9 percent and 6.6 percent, respectively, in November 2013 compared with 18.1 percent and 6.8 percent in December 2012.

The interest rate spread narrowed from 11.3 percent in December 2012 to 10.3 percent in November 2013 reflecting a larger decline in the lending rate.

The NSE 20 share index has improved from 4,133 points in December.2012 to 4,885.9 points in December. 2013, representing a growth of 18.2 percent with Market Capitalisation improving from Sh1,272.4 billion in December 2012 to Sh1,900.7 billion in December 2013, representing an increase of 49.4 percent.

The Treasury indicates that over the medium-term, growth is expected to pick gradually across most sector. 2014 growth is projected at 5.8 percent, 2015 by 6.4 percent and reaching seven percent by 2017, as global conditions improve, continued investment programmes and macroeconomic stability is sustained.

The fourth quarter of 2013 is expected to grow by 6.7 percent for the annual growth to reach 5.1 percent in 2013.

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