14 June 2018

Kenya: Rotich Tough Balancing Act As Gap Between Tax Revenue and Expenditure Widens

Photo: Benson Rioba/Thomson Reuters Foundation
Store in Loglogo village, near Marsabit town (file photo)

Nairobi — National Treasury Henry Rotich is Thursday afternoon expected to tell the nation on how he will finance a Sh3.072 trillion national budget on a Sh1.9 trillion revenue for the financial year 2018/2019.

Rotich, who will present his revenue measures in Parliament starting at 2.30pm, is expected to announce tax measures to bridge the widening deficit between expenditure and tax collection.

This comes against a background of missed targets by Kenya Revenue Authority in the current financial years, falling below the 1.4 trillion projection by Sh400 million.

Rotich will also have to contend with the rising debt burdening of Sh870 billion, says Genghis Capital Analyst Churchill Oguto.

"Sh470 billion of this debt is external obligations which brings to the fore exchange rate risk. In the event that the Kenya shilling weakens against the dollar, that will be a major concern for Rotich," adds Oguto.

The national government will spend the biggest chunk as it has been allocated Sh1.68 trillion, while county governments will get Sh372.7 billion.

The Judiciary has been allocated Sh17.8 billion while Parliament's allocation is Sh42.5 billion, as Sh962.5 billion set aside for the Consolidated Fund to pay government loans.

Ogutu expects revenue collection enhancements, fiscal consolidation and investment in the big four agenda will dominate the CS's speech this afternoon.

"Although there has been emphasis on the Big Four Agenda, the overall 2018/2019 budget has not been fully realigned to its implementation. We believe there exists much scope to better articulate the overall Big Four drivers in the linkages with the sector that could act as enhancers in the budget expenditure," said Churchill Ogutu.

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