20 May 2019

Kenya: Taxman's Headache to Fill Sh500 Billion Budget Hole

The taxman has an uphill task of collecting a staggering Sh500 billion from taxpayers in less than two months if the government is to live within its budget, latest financial records from the National Treasury show.

ROLL OVERS

The statement of actual revenues and net exchequer issue, which details how much government has collected against its targets, further shows that the country's income is lagging far behind its expenditure needs, painting a sorry state of financial affairs.

Already, the Treasury has cut the national budget by at least Sh48 billion and taken a Sh210 billion Eurobond loan as it walks a tightrope trying to reconcile its ambitious expenditure plan to the actual revenue collected.

The statement published in the Kenya Gazette on Friday shows that the Kenya Revenue Authority (KRA) had only raised Sh1.1 trillion by April 30, 2019. This is about Sh500 billion off the target for this year. The taxman has a revised target of Sh1.6 trillion.

KRA, whose staff are under intense scrutiny over graft allegations, has to raise this amount by the end of June, an impossible feat given that it has only managed an average of Sh110 billion a month over the past one year.

This has put government expenditure plan in disarray and explains why the National Treasury cannot repay Kenya's debts without taking up fresh loans. The non-tax income is also lagging far behind the expenditure. The financial statement shows that, by end of April, Kenya had raised Sh47.5 billion against a target of Sh67 billion. It had also borrowed Sh388 billion from the domestic market, against a target of Sh537 billion.

This debt is broken down into Sh317 billion that is expected to be borrowed from the domestic market. The remaining Sh220 billion will be from internal debt redemptions, where government borrows to pay debt, also known as roll overs in financial jargon. The delays in disbursement of funds from other international agencies is not helping the situation.

COUNTIES CASH

For instance, the African Union Mission in Somalia (Amisom) has so far disbursed Sh3.7 billion to support Kenyan troops fighting the al-Shabaab militia group in Somalia. This is less than half of the Sh8.5 billion that Amisom is expected to disburse in the year that ends in June.

Development expenditure is the biggest casualty of the expenditure mismatch. Development expenditure has been slashed by Sh30 billion this year through the supplementary budget. Initially, Treasury had budgeted to spend Sh391 billion but this was revised to Sh361 billion. But even these revised estimates are not getting easily met.

By end of April, a total of Sh215billion of development expenditure had been sent to various government agencies, ministries and departments against a requirement of Sh361billion. This represents 59 per cent of the revised budget.

Counties and parastatals are also some of the victims of the revenue shortfall and they will be forced to spend a good chunk of their budget in the final month of the financial year, in a predictable pattern that has seen counties fail to utilise development funds on time. Counties had received a total of Sh234 billion against a budget of Sh329 billion.

This year, counties are expected to get Sh327 billion, which consists of an equitable share of Sh314 billion and conditional grants of Sh58.7 billion.

Treasury has slashed Sh9 billion through the supplementary budget. Treasury was forced to cut down its recurrent budget by Sh9.1 billion. In total, the cuts between recurrent, development and counties adds up to Sh48 billion.

"Out of the conditional grants, Sh58,741,930,770, Sh24,378,792,347 is disbursed directly to county governments while Sh34,363,138,423 relates to conditional grants handled directly under the respective National Government Ministries, Department and Agencies," Treasury Secretary Henry Rotich said in the statement.

By April, Nairobi had received Sh10.7 billion of the Sh15.5 billion allocated while Nakuru had been given Sh7.8 billion against a requirement of Sh10.8 billion.

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