14 June 2014

Kenya: PWC Faults Counties Budgetary Allocation

THE Sh226.7 billion allocation to the country governments in the year 2014-15 budget is not enough and could prevent the optimal realization of devolution functions, the PricewaterhouseCoopers analysts have warned.

PwC said the allocation to counties constitutes 12.8 per cent of the total (Sh1.77 trillion) budget, therefore, differing with the view of National Treasury cabinet secretary Henry Rotich that "the Sh226.7 billion allocation is well above the 15 per cent minimum mandated by the Constitution."

"The costing of the devolved functions and the basis for the division of revenues needs to be reviewed. The national and county governments need to work together so that counties manage to achieve the 80 per cent absorption target set for the capital budget and to improve implementation of projects," Simon Mutinda a partner at PwC said Friday during the presentation of insights on the Kenya's 2014-15 budget in Nairobi.

He said the county governments spent much time last year drawing a layout for carrying out devolved functions adding that they are likely to fully utilize their current budget allocation.

"Counties are now expected to spend at least 80 per cent of the development budget while reducing waste and ensuring value for money," he said.

Anne Eriksson, senior partner cautioned the government to release the finance bill for public comment or risk losing key investors saying "the business community thrives when they can predict how the business environment will be especially on policy."

"But the business outlook will be stable as there were no shifts in the government's policy direction during the presentation of budget," she said.

PwC director, Steve Okello said the budget deficit for this fiscal year is expected to be 4.1 per cent of the gross domestic product and it will be financed by domestic borrowing without putting pressure on the cost of credit.

" This is a fair budget focused on efficiency and prudent use of resources. It has good intentions but it requires continuous review during the year to ensure the desired results are achieved," he said.

According to PwC's partner Rajesh Shah, the government should cast focus on broadening the tax base by sealing loopholes in tax collection, adding that the formulation of excise tax bill will give it an opportunity to transform taxation of consumption.

"Broadening the tax base will be key in reducing rates and getting more revenue. If the Kenya Revenue Authority is able to increase the tax net, the tax rates will come down and households will have more money to spend," he said.

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