, NAIROBI, Kenya, Oct 15 – National Treasury Cabinet Secretary Henry Rotich says the delays in payments for essential services can be attributed to low revenue collection and high borrowing costs.
Rotich who was appearing before the National Assembly Budget and Appropriations Committee to explain the current economic situation in the country cited global market volatility in the wake the appreciation of the US dollar and slowdown of growth in China as being other reasons.
“The mismatch of available resource and the demand for resources is frequently observed during the first quarter of the year owing to several reasons including a tendency for revenue shortfall and large commitments made by ministries and department agencies towards the end of the previous year which become immediately payable at the beginning of the new year and are treated as a first charge on the available resources in order to avoid penalty charges,” he said.
He, however, said there was no serious cash crisis.
He said the Treasury is working to reduce domestic borrowing in order to forestall choking economic growth.
“Tightening of domestic liquidity and high interest rates could potentially slow growth. We have taken steps to substitute domestic borrowing with foreign borrowing so as to continue executing the budget while easing pressure on domestic interest rates,” CS Rotich told the House committee.
He said in order to bridge revenue shortfall, the Treasury has established a three-month debt and audit programme which will help the Kenya Revenue Authority increase revenue and curb wastage.
In the four prong programme which Rotich said is expected to yield additional revenue amounting to about Sh21 billion; KRA will rapidly identify and enforce collection on debt which is currently not in dispute.
Rotich said a new audit governance framework is in place and over the next three months it will target transfer pricing, construction of mega projects and tax compliance of large retailer and wholesalers.
The third arm of the programme will involve KRA bringing an estimated 130,000 out of 150,000 landlords online following the amendment of the Income Tax Act. Lastly KRA will be required to put in place measures to improve tax payer compliance in respect Pay As You Earn (PAYE) and Value Added Tax (VAT).
The committee chairman Mutava Musyimi said the legislators was concerned by the Executive’s cash flow management process.
The worry for the committee is that the low cash release is likely to conspire and make the country fail to meet not just the revenue targets but also the growth targets.
Musyimi said: “There seems to be policy confusion between the Treasury and Central Bank on this matter of interest rates. It sends disquiet into the back to the markets; the market does what markets do. They act in manners that eventually penalise borrowers. Can you just tell us where we are with interest rates?”
The CS is expected back in the House next Thursday to respond to MPs’ supplementary queries on the content of statement.