NAIROBI, Kenya, April 7 -As all eyes are on Treasury Cabinet Secretary Ukur Yattani who is scheduled to issue the 2022/23 budget statement on Thursday, experts have urged the government to increase allocation to agriculture sector in order to ease the increase in food prices.
The budget which is President Uhuru Kenyatta’s last one before he leaves office is estimated to be Sh3.3 trillion excluding debt redemptions, an increase of 200 million from the current financial year.
Ordinary revenue which comes from corporate taxes, VAT is expected to grow by 300 billion from 1.8 to 2.1 trillion.
Ken Gichinga, the Chief economist at Mentoria economics, urged the Treasury to focus on a policy shift towards local production and especially the agricultural sector which he said is a key driver of the economy.
In the current financial year, the Government allocated Sh60 billion to the agriculture sector
“I expect the CS to reflect on the high cost of living, especially food and fuel prices, this should trigger local production in order to boost food sufficiency,” he said.
He listed land, labor, capital, and entrepreneurship as the key factors which the Government should concentrate on in order to increase agriculture production.
“When the agriculture sector thrives, other sectors of the economy booms, especially the services sector such as restaurants, these will also cushion the country from being disrupted by global shocks such as COVID-19 and the recent Ukraine-Russia war.
In order to unlock these factors, he said the government could focus on land reforms, removal of barriers to entrepreneurship, favorable tax policies, and improved access to credit for farmers,” he added.
Economic analyst, Churchill Ogutu, in a separate interview with Capital FM Business, echoed Gichiga’s concerns even as he called for more strategic interventions targeting the sector which he noted has shrunk over years.
Nonetheless, he remained pessimistic about such a move predicting that the food prices issue will be looked at as a temporary measure that could ease before the start of the financial year in June.
“Policymakers will expect that the runaway increase in prices will be temporary and will ease out eventually, they may not intervene as Kenyans expect,” he explained,
“By the time the financial year starts in July, probably some of these risk factors may have faded out so they may not intervene at this point in time. They will wait for the next administration to come in in order to the issue in the event that these issues may have protracted by then.,” he said.
While the budget deficit compared to the GDP is projected to reduce to 5.9 percent, Ogutu termed the figure as over-ambitious citing previous financial years when the government exceeded borrowing targets thus increasing the aggregate fiscal deficit.
“More likely than not, the government will increase borrowing, especially from domestic borrowing, this will result in an increase in fiscal deficit,
In the current financial year, the borrowing rose to Sh 1 trillion compared to the projected Sh930bn mentioned during the release of the previous budget.
Overall, the two exuded moderate expectations of the budget, especially with the lack of a finance bill which was expected to have additional tax measures to ensure the ordinary revenue collection target is met.
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