Uhuru budget to strengthen growth

June 10, 2010 12:00 am

, NAIROBI, Kenya, Jun 10 – Uhuru Kenyatta on Thursday delivered his second Budget Speech as Finance Minister which he said was meant to consolidate economic recovery and put Kenya on a growth trajectory.

The Sh996.8 billion Budget themed “Towards inclusive and sustainable economic growth” sought to ensure that development is broad-based and has a trickle-down effect to the grassroots levels.

“This will require steering the economy back to the seven percent growth achieved in 2007 to reach our Vision 2030 target of 10 percent in the course of the next five years. Thereafter, we must maintain the growth path at the level that ensures that growth is inclusive so that no single Kenyan is left in poverty,” he said.

While many Kenyans might be disappointed since the budget did not touch on the ‘bread and butter’ issues, it dwelt a lot on issues of development particularly in the rural areas, food security and housing.

In previous budgets, the common Kenyan always looks forward to the reduction of food stuffs and in taxation but this has not happened. But instead outlaying measures that would interfere with market dynamics in a liberalised economy; he outlined mechanisms that are long term and those that have far-reaching benefits for the mwananchi.

The Minister allocated nearly Sh200 billion towards infrastructure development such as roads, rails and the port and billions of shillings for expansion of area under irrigation as the country gears up for reducing its dependence on rain-fed agriculture.

Arid and Semi Arid Areas (ASAL)  will see Sh11.4 billion injected in areas such as fish farming, agriculture and the development of social amenities such as hospitals, schools and slaughter houses to open them up and have them contribute to economic development.

Rural areas will also benefit following the development of infrastructure that is meant to provide easier access to them as will Nairobi which will also be decongested where Sh1.9 billion has been set aside for a Commuter train transport network that will cover North Airport road, Mombasa and Jogoo Roads.

The private sector will have a conducive climate in which to do business particularly once the Business Regulation Bill which will soon be tabled before Parliament is enacted. Besides improving the regulatory framework, it will also eliminate situations where especially the municipal councils unilaterally and arbitrarily increase fees for the business community.

To deal with the controversial issue of Value Added Tax (VAT) refunds, he said a Tax Reform Commission would soon be formed to among other things come up with a simplified tax code that includes a VAT legislation that will address most of the challenges faced by the private sector.

Mr Kenyatta further pledged to have all pending and genuine VAT refunds as at the end of this month paid by July.

Going forward, the Kenya Revenue Authority will be required to clear new claims filed in coming months within 100 days.

And on the energy sector front, the government plans to spend Sh34.1 billion to fund various activities in the energy sector and ensure provision of clean and adequate power in the country.

These funds, he said will go towards the expansion of national transmission system, generation of geothermal and coal power and also the rural electrification program.

He says the government will partner with the private sector to jointly generate about 500 megawatts of geothermal power and as well produce power from solid waste from municipal councils.

All these projects he says will help inject an additional 800 Megawatts to the installed capacity by the year 2015.

These measures will however require a lot of funds to execute with development funds in the next financial year pegged at Sh321.2 billion. He was hopeful that reforms in tax collections would help bolster revenues to meet the recurrent expenditure estimated at Sh675.6 billion.

The essence of these measures is to ensure that the country is able to weather the any external or internal shocks and put the country back on the path that will lead the country to a middle income and industrialised state in the next twenty years.

Although he acknowledged that the country’s goals face inherent risks from the global economy, challenges of climate change, unemployment, food scarcity, he expresses optimistic that these long term development goals would be attained.

Many experts however believe that effective absorption of development funds still remains the biggest challenge for the government.

Tax Manager at Ernst and Young Hanna Kamau said the government should consider putting in place a plan on how allocated funds will be spent in the four quarters of the year to spur economic growth. 

Procurement challenges, capacity constraints and delays in the disbursement of donor money have always been cited as some of the challenges that have seen some ministries unable to use about 50 percent of their budget.

To deal with this problem, accounting officers will be required to commit themselves in performance contracts to utilise at least 90 and 80 percent of domestically and foreign financed development budgets.


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