14 June 2019

Kenya: Budget Still Heavy On Spending Amid Graft

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editorial

The Budget read on Thursday continued the trend in recent years: heavy on spending and thin on wealth creation.

The proposed Sh3 trillion Budget, the highest ever, is largely driven by hefty expenditure on recurrent costs and infrastructure projects and, for the latter, some of questionable value.

For its focus on infrastructure development, the government is staring at substantial borrowing, which raises the debt portfolio, ultimately stifling growth and undercutting efforts at wealth creation.

Infrastructure is vital for socio-economic development. But they must be feasible and affordable.

Recent experience has shown that most of the projects are enormously expensive due to corruption and, secondly, do not generate commensurate revenues.

BIG 4 AGENDA

National Treasury Cabinet Secretary Henry Rotich said the Budget is aimed at triggering economic transformation, entrenching the 'Big Four Agenda', continuing the expansion of social services such as health and education and targets youth empowerment and expanding small- and medium-scale investments.

The objectives are quite valid and convincing. Infrastructure development remains a critical endeavour because of the spin-offs.

Equally, since the government has locked onto Big Four priorities -- health, food security, affordable housing and manufacturing -- it's imperative that the Budget is configured to incorporate and enhance their achievement.

However, the devil is in the detail. For starters, the bulk of the Budget is directed at salaries and administration -- Sh1.7 trillion -- which basically means consumption.

In this context, the government is continuing a practice of spending rather than producing. And that is fraught with challenges; it's not sustainable.

EDUCATION

Notably, the minister introduced some cost-cutting measures -- such as credit cards for travel to curb excessive expenditure by government officers on official trips.

Its not lost on anyone that the practice of issuing imprest has been massively abused. The question is, will such constrictions be implemented?

In terms of ministries, education and national security were the biggest beneficiaries, the latter's budget expanding to take care of social interventions such as free primary education, subsidised secondary education and loans for higher education students.

National security traditionally gets a huge chunk because of its centrality in the citizen's life.

However, it is increasingly becoming important to interrogate the details of the expenditures with a view of rationalising, emphasising what is critical and leaving out the peripheral.

REVENUE COLLECTION

As one of the four priority areas, health equally received increased funding that seeks to actualise the universal health coverage programme.

But while these sectors require enhanced investment, the corollary should be value for money.

Another big cost was allocation to counties -- Sh371.6 billion -- which have emerged as the ideal hubs for grassroots development.

Even so, they have also turned out to be major spenders and avenues for pilferage, the reason questions are emerging over their viability.

Notwithstanding constitutional imperative that they be funded by the national government, counties must be pushed to begin and expand own revenue collection.

To fund the Budget, Mr Rotich resorted to expanding the tax base and raising tariffs for the 'sin' commodities -- alcohol and cigarettes.

DEBT

He extended withholding tax to various services, apart from the common ones, to include security, fumigation and outside catering.

Arguably, these have evolved as fairly rich areas for cash generation, but a clever way of targeting them should be sought, given that most of the operators are quite informal.

But what should worry Kenyans is the growing debt regime. The government will be forced to borrow Sh600 billion-plus to plug the Budget deficit.

Already, the national debt has hit Sh5.3 trillion, nearly double the Budget. Continued pile-up is a major threat to the economy.

As an obligation, any revenue collected is prioritised to debt service.

In that sense, a country finds itself unable to plan long-term with own generated revenues and the end result is continued dependence on debts for sustenance.

TAX BASE

The government must intensify reforms at the Kenya Revenue Authority to seal the loopholes and enhance tax collections.

Similarly, KRA must streamline its operating systems to plug leakages.

Importantly, the National Treasury must push for budget rationalisation. There are pertinent questions about government spending, where resources are misdirected to non-priority areas, including hefty remuneration for some top officials.

War against corruption, pilferage and leakage must not cease as they constitute the worst channels for loss of public resources.

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