Kenya: Ensure Scarce Budget Funds Are Well Spent

Though Deputy President William Ruto is not the only one affected in the Budget cuts, he is among top officials in the Executive with the steepest cuts in the 2020/21 spending plan, which will see the government spend a total of Sh2.7 trillion.
editorial

The National Treasury presents this year's Budget today against uncertain circumstances. Rightfully, it can be called the 'crisis recovery budget'. Kenya, like the rest of the world, is going through one of the worst pandemics in living memory. The coronavirus scourge has visited the vilest health, social and economic devastations on nations. Economies are tumbling and, given projections from the International Monetary Fund, another 'Great Depression' looms this year. It is worse than the financial crisis of 2007/8 induced by the subprime mortgages.

National Treasury Cabinet Secretary Ukur Yatani has to do a delicate balancing act. Tax revenues will drop drastically, but expenditure is bound to shoot up as the government rolls out recovery packages. Conservative estimates by the Treasury project a Sh170 billion loss in forfeited taxes due to the reduction of value added tax and other tax reliefs. Yet tidy sums have to be injected into the economy to stimulate recovery and growth.

On paper, the Treasury is seeking Sh2.7 trillion to run the government in the next financial year and the bulk of it is for recurrent expenditure, particularly paying salaries. This is against an estimated revenue collection of Sh1.6 trillion. Thus, the Treasury is budgeting with a huge deficit. Consequently, the government will be forced into increased borrowing to plug the shortfall and that creates and perpetuates a problem: Debt crisis.

Already, the country is reeling from a huge debt pile-up amounting to Sh6.4 trillion, out of which Sh900 billion is due. Running such high debt is fraught with risks. About 55 per cent of government revenues has to be spent on debt servicing, crowding out cash for capital development. To thrive, the government has to continue borrowing, thrusting the country into a debt treadmill.

But more disheartening is the fact that some of the borrowed cash is squandered and never benefits the citizens. A case in point is the controversial Sh280 billion Eurobond cash borrowed in 2014 and whose use remains a mystery to date. Yet, the government has to pay about Sh50 billion this year to service it.

It is understandable that this is a difficult year and the Treasury has to do unusual things. But it has to remain focused on doing the right balance. Debt management is crucial and all loans have to be properly accounted for.

The onus is on Parliament to scrutinise the Budget properly and seek justification for all proposals. It would be important, for example, to ask how all the monies being borrowed under the guise of Covid-19 are shared out. Prudence remains key.

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