A reflection on Kenya’s budget 2012/2013

The 2012/2013 Kenya’s National budget was the last one to be tabled by the Coalition Government. It was the most ambitious yet with the estimated allocations amounting to Ksh 1.459 Trillion. The budget for the 2012/2012 financial year was KES 1 Trillion.

Kenya’s economy grew by 4.4% in 2011 compared to 5.8% in 2010. With this shortfall in mind, the thrust of this year’s budget was restoring and sustaining economic growth by focusing on economic policies and structural reforms aimed at facilitating the expansion of the private sector, promote productivity and the economic capacity for employment creation.

While this economic drift is in line with the spirit of the new constitution and the attainment of MDGs and Vision 2030, majority of Kenyans were looking forward to a budget that would relieve them the stress of the rising costs of living and cushion the vulnerable from the harsh economic times.

On the contrary, the new VAT laws seeks to remove tax advantage on some basic commodities such as milk, bread and maize flour, some of which were exempted from VAT or were taxed at 12%  by subjecting them to a 16% tax. Electricity which was also taxed at a reduced tax of 12% is also set to rise to 16%. Other than the projected rise of basic commodities, the cost of renting houses in urban areas is set to increase. According to the budget, KRA will map residential areas and document property owners’ rental incomes with a view of taxing them accordingly.  The costs of increased taxes to the landlords will in effect be transferred to the tenant.

The disparity between the recurrent and development expenditure was also a cause for alarm. The recurrent expenditure, which in the Kenyan case mostly consists of statutory obligations and the salaries of civil servants is projected to cover 70% of the budget. The remaining 30% is allocated to development expenditure to cover costs such as improvements on the country’s infrastructure.

In addition, the budgetary deficit of 1.6 % or Ksh 279 billion will result to borrowing to fill up the budgetary shortfalls. This will increase the internal and external debt portfolios which will strain the citizens and drain the country’s financial resources in paying back for a long time to come.

Though seeking extra ways and means of restoring and sustaining economic growth is a noble strategy, the government needs to focus on operating within its own means and within the parameters of sustainable development. A budget which sets to raise the costs of living will definitely reverse social gains and perpetuate socio-economic instability and inequality in the country. The Exchequer needs to reign in the recurrent expenditure without necessarily laying off workers or by overtaxing the majority while a few who are well off are exempt from taxes.

The country’s debt burden needs to be reigned in as well. If the economy of the country turns increasingly to debt financing, the quest for long-term debt sustainability will not be attained thus forever mortgaging the sovereignty and identity of the country to relentless commercial interests. Though the public-private partnerships are welcome as they indicate willingness by the government to facilitate private participation in the provision of public services, such a partnership should be well managed to ensure that the private sector does not take over the roles of the government. Policy and operational boundaries on the roles of the government and the private should to be drawn and worked out very carefully.   Otherwise, the country will be driven deeper and deeper into the quagmire of corporate globalization which has destroyed the moral fabric of many countries in the world.

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