Treasury seeks to push borrowing to Ksh.951.4 billion


Treasury seeks to push borrowing to Ksh.951.4 billion
File Treasury Cabinet Secretary Ukur Yatani. PHOTO| COURTESY

In Summary

  • The plan to borrow more funds to the end of June 2021 indicated in the draft 2020 Budget Review and Outlook Paper (BROP) published on Wednesday betrays the ministry’s hyped fiscal consolidation program under Cabinet Secretary Ukur Yatani.
  • Ordinary revenues targets which present tax collections by the KRA are set to be recalibrated to Ksh.1.523 trillion from an approved Ksh.1.633 trillion with the Treasury having taken into account declining tax heads including income tax, VAT and exercise duty.
  • The move to take more loans is expected to pack more pressure on the country’s debt sustainability with the stock of public debt presently sitting at Ksh.6.7 trillion as of June 30.

The National Treasury has proposed to push its planned borrowing across the 2020/21 fiscal year by 13.1 per cent to Ksh.951.4 billion from a previous net sum of Ksh.841.1 billion.

The plan to borrow more funds to the end of June 2021 indicated in the draft 2020 Budget Review and Outlook Paper (BROP) published on Wednesday betrays the ministry’s hyped fiscal consolidation program under Cabinet Secretary Ukur Yatani.

The push towards increased borrowing has been prompted by shocks to internal revenue mobilisation efforts with collections across both July and August falling behind targets by double digits.

The prolonged effects of the COVID-19 pandemic on economic activities has pointed towards an underperformance in both revenue collections and expenditure for the year.

Consequently, the National Treasury has indicated plans to trim total revenue targets to Ksh.1.782 trillion from an original Ksh.1.892 trillion.

Ordinary revenues targets which present tax collections by the Kenya Revenue Authority (KRA) are set to be recalibrated to Ksh.1.523 trillion from an approved Ksh.1.633 trillion with the Treasury having taken into account declining tax heads including income tax, VAT and exercise duty.

Foreign loans are set to see the biggest rise of 14.8 percent with net foreign financing set for adjusting to Ksh.396.8 billion from Ksh.346.8 billion.

Net domestic financing is meanwhile set at Ksh.554.6 billion in draft budget review from an initial Ksh.494.3 billion.

The National Treasury has set its sights on higher program loans to grow external sourced funds having held expected proceeds from commercial financing at a flat Ksh.6.2 billion.

Credibility deficit

The 2020 draft BROP throws a spanner to the works as it contradicts Treasury’s stance on running balanced and realistic budgets.

For instance, the National Treasury has held off against any cuts to expenditures as it instead covers the whole in revenue mobilization with more loans.

Total expenditures and net lending has been retained at Ksh.2.79 trillion against the backdrop of weakened revenues.

The move to take more loans is expected to pack more pressure on the country’s debt sustainability with the stock of public debt presently sitting at Ksh.6.7 trillion as of June 30.

In an earlier report, the Parliament Budget Office (PBO) indicated the country will likely break its Ksh.9 trillion debt ceiling ahead of schedule.

Speaking on Friday during the launch of the launch of the 2021/2022 budget preparation process, Treasury CS Ukur Yatani masked the credibility deficit indicating the country was still pushing to leave within its means.

“As we implement the current budget and move forward in preparing the next budget, we have to contend with the reality of trying to meet the funding requirement for our development objectives against the prevailing unfavourable macroeconomic conditions,” he said.

“This means that we have to live within our means and calls for a critical review of our existing programmes and policies to ensure that they are not only consistent with our development agenda but also informed by emerging realities brought about by emergence of COVID-19 pandemic and other economic shocks in the future.”

The National Treasury is now expected to seek the approval of the National Assembly before effecting the changes to the budget with Yatani set for his first face-off with newly installed Chair to the Budget and Appropriations Committee (BAC) Kanini Kega.

Speaking at the same launch, Kanini Kega prompted the National Treasury to effect realistic budgets.

“I urge us to live within our means. Resources are limited and the needs are unlimited. We should strike to achieve more with less ensuring we deliver to the citizens and be considerate to the plight of future generations,” he said.

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Story By Kepha Muiruri
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