NAIROBI, Kenya, Jan 12 – The government plans to spend Sh978.7 billion in the 2011/2012 financial year which will go towards supporting the resurgent economy.
This is Sh17.3 billion less than what was budgeted for the current fiscal year and it is in spite of the heavy expenditure that is expected with the implementation of the new Constitution.
Economic Secretary Dr Geoffrey Mwau said the government hopes to raise Sh777.3 billion in revenue collection and at the same time reduce expenditures to 31.8 percent of Gross Domestic Product (GDP).
"In terms of whether we can attain the revenue targets, we will be able to determine that firmly after April because a lot of companies file their tax returns around that time. Right now we are short by about Sh12 billion but I don\’t think it will be more than that. It could even be a surplus," he said of the projected tax collections.
Speaking during the launch of the 2011 sector hearings on the budget proposals for the Medium Term Expenditure Framework period 2011/12-2013/14, Dr Mwau however said that a Sh163.7billion (5.3 percent of GDP) financing gap was expected.
"This is the deficit including grants. We also expect to generate Sh58.4 billion from external financing which should cover part of the deficit, leaving about Sh105.3billion to be financed through domestic borrowing," the Economic Secretary explained.
These figures set the ceiling that all the sectors should not surpass which means that the government will have to be prudent in the allocation and utilisation of resources.
"Sometimes we keep on getting additional requests above what we have already budgeted for but we just want to underscore that once this ceiling is set, it is very difficult to accommodate anything else outside that," he emphasised.
The desire to manage the resources wisely is also seen in the government\’s deficit financing policy where it hopes to reduce domestic borrowing as well as exercise caution when taking up commercial debts to avoid getting the country into unsustainable debt levels.
For this reason, any non-concessional financing including proceeds from sovereign bonds will be limited to investment projects that can generate revenues and have high returns.
The Budget will be the first budget under the new constitution which provides for county government and the fourth budget to implement Vision 2030 first five years Medium Term Plan (MTP) 2008-2012.
Finance Permanent Secretary Joseph Kinyua underscored the importance of deepening reforms in the budgeting process with the aim of enhancing transparency and accountability in public spending.
In this respect, the Treasury plans to operationalise in all ministries and government agencies, the programme-performance based budgeting which provides the public with sufficient information that they can use to track the implementation of funded projects.
All these measures come against a backdrop of economic recovery as demonstrated by the 2010 projections which show that the growth could have been above five percent.
"We expect to see a five percent growth and in fact considering what we saw in the third quarter performance of last year, we think that this number could even be 5.2 percent," PS Kinyua enthused.
Despite the challenge of a short fall in revenue collection, expenditure pressures from the implementation of the new constitution and the Agenda 4 reforms coupled with adverse weather conditions, the economist held that the country\’s prospects still remain positive with the growth pegged at around six percent.
Maintaining macro-economic stability will therefore be the government\’s key focus. A gradual unwinding of the fiscal and monetary stimulus in order to prevent inflationary tendencies is also on the cards.