Economists slam ‘inflated’ Sh1.4tr budget

June 13, 2012
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The Institute’s CEO Kwame Owino said there was still much room for reducing the Sh1.4 trillion proposed 2012/2013 budget/FILE

, NAIROBI, Kenya, Jun 13 – Economic analysts feel that some government institutions have applied for very high budgetary allocations by including unnecessary expenditure.

The Institute of Economic Affairs (IEA) says some of the institutions presented outlandish budgets and has called on Parliament to scrutinise every item, project or programme allocations for various ministries and departments to see what can be cut down.

The Institute’s CEO Kwame Owino said there was still much room for reducing the Sh1.4 trillion proposed 2012/2013 budget.

“I think Parliament should be supported and develop the guts to actually be able to cut some of these budgets without apologies. Because I think what is happening is that these departments are to trying to over budget. Like if you know you require Sh200 million they ask for ridiculous amounts with the strategic thinking that when it is reduced, they will still end up with the actual required amount,” said Owino.

IEA Budget Program Officer John Mutua said there is need for the government to look for ways of reducing the public debt from the current 51 percent of the Growth Domestic Product to 45 percent.

“When you have such an expansionary budget the main challenge is financing it. If you look at our revenues in every financial year, we have shortfalls. And if our revenues are not sufficient, then it brings about many challenges,” said Mutua.

IEA has called for harmonisation of tax collection systems in the informal sector to ensure a great number of small and medium enterprises contribute to the tax basket.

He said due to the complexity of the sector there is urgent need to have a ‘one-stop-shop’ whereby the entities pay their fair share of taxes at the point of licensing.

“We also think it is about time the government looked at other areas of taxing, like the Capital Gains Tax; there is need to re introduce that bar. I know it previously received a lot of resistance from the politicians but being an election year I think there is need to re introduce that,” said Mutua.

IEA has also proposed increase of tax share in cigarette prices from 55 percent to World Health Organization (WHO) recommendations of 70 percent threshold and in turn meet both public health and generation of revenue objectives.

The Treasury has also been urged to review the regime granted to attract the Foreign Direct Investments (FDI) adding that this step may save up to Sh100 billion per year.

These and many other recommendations are what many will be looking forward to be considered by the Finance Minister Njeru Githae as he delivers the budget speech on Thursday at 3pm.

Other East African finance ministers are also expected to present their budgets simultaneously.

In Tanzania, the Finance Ministry has proposed a Tsh15 trillion (KSh801.4billion) spending plan for the next fiscal year, which is 17 percent more than this year.

Uganda plans to lift its spending by 10 percent to Ushs 10.23 trillion (KSh349.9billion) while Rwanda’s budget is set to increase by 15 percent to 1.4 trillion francs (Ksh196.3billion).

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