Ambitious Kenyan budget defended

June 11, 2010
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, NAIROBI, Kenya, Jun 11 – From the moment the 2010/2011 budget estimates were tabled in Parliament on Wednesday, the a buzz has been on the sheer size of the proposed budget.

For starters, budget estimates indicated that Finance Minister Uhuru Kenya would be spending Sh130 billion more than he did in the last financial year, making this the largest budget in Kenya’s history at Sh997 billion.

The buzzword amongst Kenyans from that moment on become ‘Kenya’s one trillion budget.’

As expected, the budget received varied reactions from financial analysts.

“The Budget contains no real surprises this year, but instead speaks to the right issues; it brings the lofty flagships of Vision 2030 down to earth and will support policies affecting real change,” PricewaterhouseCoopers (PwC) Country Senior Partner Kuria Mucheru told journalists on Friday.

Mr Mucheru defended the minister for being ‘ambitious’ to suggest a trillion shilling budget arguing that the country was on a path toward recovery going by the 2.6 percent GDP growth realised in 2009.

He said the minister went back to the fundamentals of a developing economy therefore addressing issues around investment, food security, business regulatory environment and unemployment.

Some thought the budget would be predictable with the likelihood that Mr Kenyatta would look towards increasing taxes or imposing new taxes, but again the minister sprung another surprise to skeptics.

“It was not a radical budget as such but it was certainly a bold budget with the government throwing a challenge to itself saying it can bring intended growth by dedicating public funds to infrastructural development without necessarily raising taxes,” PKF Kenya partner Sunirmal Mitra said.

Ernst and Young described the Sh997 billion-budget as “too ambitious” for the country, which will force it to rely on external borrowing leading to an increase in foreign debt.

Tax Consultant Grace Mulinge said Kenya did not raise enough revenue during the past financial year to adequately sustain expenses and could have to source alternative ways to meet her needs.

“It’s a very great challenge because the economy was directly and indirectly affected by the crunch. In addition, the budget is financed by taxation and evidently the revenue authority did not meet their targets which means that if the country fails to raise the money, the government will have to borrow heavily which is a huge cost,” she said.

In the coming financial year, the Treasury also plans to reduce domestic borrowing to Sh105.3 billion to help bridge a Sh188 billion deficit.

In past budgets, Kenya has factored in minimal donor funds as donors, concerned about corruption in government, tightened purse strings.

This has however changed over the years as donors faced competition from ‘Asian Tigers’ looking to invest in the country.

“We\’ve seen a lot of investment interest from the East. Obviously the geopolitics is such that people need to remain relevant so perhaps they will engage more,” Mr Mucheru, said.

Mr Kenyatta said he would tilt on external concessional funds especially to finance the development expenditure.
 

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