Yatani’s normal budget in abnormal circumstances
- This is as allocations to the post Covid-19 economic recovery wounds up at Ksh.56.6 billion against a sizeable economy estimated at Ksh.9.7 trillion in value according to the 2020 Economic Survey.
- The theme for the Ksh.2.79 trillion budget was defined as- ‘stimulating the economy to safeguard livelihoods, jobs, businesses and industrial recovery’ in line with tackling the effects of the global health emergency.
- New taxes meanwhile take away further from Treasury’s intended relief to households at a time when the government is making an admission of job losses in excess of 1.7 million.
Drawing from a popular anecdote by Health Cabinet Secretary Mutahi Kagwe, experts have termed the 2020/21 budget statement as normal in abnormal circumstances.
This is as allocations to the post Covid-19 economic recovery wounds up at Ksh.56.6 billion against a sizeable economy estimated at Ksh.9.7 trillion in value according to the 2020 Economic Survey.
In his maiden budget statement to Parliament on Thursday afternoon, Treasury Cabinet Secretary Ukur Yatani made his presentation at a lightning speed a little after 2:30 pm setting the government agenda across the 2020/21 fiscal year.
The theme for the Ksh.2.79 trillion budget was defined as- ‘stimulating the economy to safeguard livelihoods, jobs, businesses and industrial recovery’ in line with tackling the effects of the global health emergency.
“The theme underscores our determination to protect lives and livelihoods and cushion vulnerable citizens 12 against the adverse effects of COVID-19. This is further expected to create and protect jobs, stimulate industrial growth and ultimately steer economic recovery,” said CS Yatani
“To sustain efforts towards the full recovery of the economy, the Government is currently developing a Post Covid-19 Economic Recovery Strategy under the leadership of H.E The President. The Strategy will not only accelerate economic recovery but is designed to provide a road map for transition to new development framework beyond the current Vision 2030.”
However, economist Tony Watima believes the statement was casual and misrepresentative of the theme to tackle the pandemic as allocations to the recovery plan present less than one percent of GDP.
“The design of the budget is like we’re in normal business. Yatani seeks to leverage the Big 4 to anchor the recovery of the economy which is the wrong approach. The current problem is is a shock from the pandemic, what we would have desired to see is additional allocations to health and social protection,” he said.
Cytonn Research Analyst David Ngugi concurs with the observation as he observes the Ksh.56.6 billion stimulus as too small to spur a solid economic rebound.
“For an economy expected to grow at a mere 2.5 percent at best in 2020, the Ksh.56.6 billion is too low.
While the economic recovery plan received a mere share of the national cake, long term projects under the medium term plan have received appropriations in excess of Ksh.127 billion.
New taxes meanwhile take away further from Treasury’s intended relief to households at a time when the government is making an admission of job losses in excess of 1.7 million.
Yatani intends to among other measures lift key tax exemptions on common user goods including LPG gas and clean cooking stoves.
Further ammendments to contained in the 2020 Finance Bill propose to levy taxes on pensioners under the National Social Security Fund (NSSF) while taking away relief on home ownership saving plans (HOSPs)
Moreover, loss making businesses are expected now to account for tax at the rate of one percent of gross revenues while online businesses will be the subject of a new digital services tax priced at 1.5 percent of gross sales by the company.
Experts have termed the move as backward against needs to cushion ordinary Mwananchi even as Treasury seeks to leverage the reforms to raise Ksh.38.9 billion in fresh revenues to fund the government.
“This will only work to raise the cost of living as the impact of the pandemic takes away from personal incomes. The worst thing the government could do is take away people’s disposable incomes,” said Watima.
“It’s like take one step forward and two steps back,” added Cytonn’s David Ngugi
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