Kenya’s government has lined up Ksh2.91 trillion budget for the financial year starting July, targeting a deficit of 4.9 percent compared to this year’s 6.3 percent.
This is expected to ease pressure on budget and perhaps help contain the country’s borrowing appetite that has seen public debt rise to Ksh6 trillion, forcing the state to impose high tax, hence high cost of living.
Abraham Muthogo, an economic analyst and the Chief Executive for Miradi Capital spoke to Metropol TV on where the country is headed with the looming cuts in the budget by the National Treasury ahead of the next financial year 2020/21.
The National Treasury told us by 2020 we are going to see growth in development stand at 6 per cent. Are we going to see it?
I think it’s finally caught up with us. The issue is that we are living large and we don’t have the money to do it, we have to sit down and pull down the budget completely.
We pull it down and do it from zero, start by how much we can collect from Kenya Revenue Authority. If we are working within a timeframe of Ksh2 trillion, we must work with it. But the way we are doing it creating a wish list then find a way of funding it, then we have a problem and as a country, we will not grow. For you to spend less you must shrink the government so that we spend less on maintaining it. This does not mean we deliver less.
Everybody did say that you cannot have a budget purely based on a correctional model, Treasury CS Ukur Yatani is just correcting the mistake. Does it mean the 6% might actually receive a bigger hit in reality that Big 4 Agenda will not be supported fully?
The Big 4 Agenda will be affected, and maybe we have to sacrifice one financial year and do nothing else other than just clean house where you bring the whole house down and you build it a fresh. What the government is trying to do is to build plasters, because we have a Ksh3 trillion budget and we can hardly collect Ksh2 trillion so we have to think a fresh, where you do absolutely nothing but fixing.
See what you can do by just putting little money and expanding the economy, but again we will never run away from this side of the government, our fiscal disciplinary needs to improve drastically.
When you start cutting development expenditure it means you are just maintaining the status quo- getting money, paying salaries, paying rent, paying for travel then wait for another year. This is a country we cannot grow
Do you think National Treasury has done enough, to empower KRA to collect this money come 2020/2021, because that is going to be a problem again?
KRA has done a very good job but it can do better because tax is something one can avoid, very few people will come and say “here is my tax”. We can collect more but for that to happen we have to apply a different tactic.
For KRA to collect more revenue, it definitely must do things differently. In a shrinking economy, giving someone a budget that is going upwards will not work, because the economy is shrinking and that is the fact and cutting on developmental expenditure only impacts national income and the cash flow because of pending bills.
Let’s first collect what we can afford and then draft budget from what we have, unlike creating an expenditure then look for money. Domestically, the rates are going down so whenever you inflate government papers, people will not buy because the rates are low. Most of our debt is external at Ksh3.1 trillion against domestic loan which stands at Ksh2.9 trillion
