Govt gets Sh30b shortfall in 2011-2012 revenue

November 15, 2011
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The government also failed to hit its target in the appropriation of aid/FILE

, NAIROBI, Kenya, Nov 15 – The government missed its total revenue target by a whopping Sh30.2 billion in the first quarter of the 2011/2012 financial year, as the country continues to grapple with a harsh economic environment.

According to the quarterly economic and budgetary review, ordinary revenue collection in the period from July to September 2011, amounted to Sh147.1 billion against a target of Sh161.9 billion, resulting in an under collection of Sh14.8 billion.

The government also failed to hit its target in the appropriation of aid – which is the money collected by a department in the course of its business and which has been approved by Parliament, having just collected Sh2.1 billion against a target of Sh17.5 billion.

“Cumulative revenue collection in the first quarter of financial year 2011/12 was Sh149.1 billion – equivalent to 4.5 percent of GDP- against a target of Sh179.4 billion- equivalent to 5.5 percent of GDP,” the report indicated.

Further the report showed, the Sh15.4 billion deficit however did not factor in collection by universities and various ministries.

The current economic climate this year has been one of the toughest that the country has experienced in the recent past.

A combination of adverse impact of drought on key sectors, skyrocketing interest rates, spiralling inflation, a deteriorating shilling, high oil prices and a ballooning balance of payment account are just some of the factors that are responsible for the sickly economy.

This has been reflected in the Gross Domestic Product (GDP) which slowed down to 4.1 percent during the second quarter of 2011, down from 4.6 percent in the same period in 2010.

The fact that the government is increasingly failing to meet its financial obligations has also meant that it has had to source for funding externally with net borrowing raising by Sh1 billion to 2.9 billion by the end of September 2011 compared to a net borrowing of Sh1.9 billion in a similar period in 2010/11.

The bearish mood has also been witnessed in the stock market with the Nairobi Securities Exchange (NSE) continuing to weaken on the back of the uncertainties brought about by the euro zone debt crisis.

The NSE 20 share index dropped by 29.1 percent from 4,630 points in September 2010 to 3,284 points in September 2011 as did the market capitalisation which dipped from Sh1.174 trillion in September 2010 to Sh886 billion reflecting ‘risk-averse tendencies’ among market players.

Given the market conditions, analysts have been bearish, revising downwards their economic projections for this year from the ranges of five to six percent to between three and four percent.

However, while it acknowledges the challenges facing it, the government is banking on the agricultural sector to bolster growth.

The report for instance cited the 2011/2012 budgetary allocation of over Sh100 billion in the agricultural sector saying it demonstrates the government’s commitment to the industry as the economy’s backbone.

“However, a constant underlying theme is the need for access to affordable credit and risk management products, particularly to small scale agricultural producer, ” the report read adding that this calls for the formation of formidable partnerships with the private sector to help drive sustainable growth.

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