Less tax measures to finance 2016/2017 budget – PKF

June 6, 2016
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Apart from borrowing Mburugu says there will also be the option of Public Private Partnerships (PPPs) would come in handy especially in financing major projects/FILE
Apart from borrowing Mburugu says there will also be the option of Public Private Partnerships (PPPs) would come in handy especially in financing major projects/FILE

, NAIROBI, Kenya, June 6-The government is likely to finance the coming 2016/2017 budget deficit through heavy external borrowing.

According to PKF Tax Partner Michael Mburugu, the heavy borrowing will be due to less or zero new tax measures expected to be introduced to fund the Sh2.26 trillion budget.

He however says if that will be prudent for the government to avoid borrowing locally as that would lead to escalation of commercial lending rates.

“I don’t think the focus will be to expand the taxes, because over the last many years, the government has been bringing in new taxes like the capital gains tax. There is likely to be huge funding deficit and the government will obviously be borrowing and we expect it would be external,” Mburugu said.

Apart from borrowing Mburugu says there will also be the option of Public Private Partnerships (PPPs) would come in handy especially in financing major projects.

While presenting the budget estimates in April this year, Treasury Cabinet Secretary mentioned that “the external borrowing will largely be biased towards concessional loans.”

But even as government plans to tell Kenyans where they will get money to finance the huge budget, corruption has been mentioned as the key challenge that if managed, it would largely reduce the country’s increasing debts.

“We commend the government for the positive steps to combat corruption in the public sector. However, we cannot overlook adverse effects of corruption in various agencies of government. . In this regard we propose, Stricter sanctions and penalties, outsource Auditor General’s function as well as carry out value for money audit for all government projects,” he said.

The Treasury is targeting a revenue collection of Sh1.49 trillion up from Sh1.29 trillion in the last financial year.

In the budget, Parliament has been allocated Sh24.6 billion, the Judiciary Sh15.3 billon while Sh228.5 billion has been allocated to constitutional commissions such as the Teachers Services Commission (TSC) and other independent offices.

The budget has tried to give more attention has been given to food security and agriculture, transport and logistics, flood control and water harvesting and other key projects so as to drive inclusive growth.

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