14 June 2012 was a big day to the Kenyan people. It is a day the Grand coalition government tabled its last term budgetary estimates for 2012/2013 financial year. The cost of living in the country is in the rise, and Kenyans were looking up to the budget to address some vital issues that touch on their welfare. In today article, allow me to crunch the figures and highlight what these numbers mean to you and your neighbor.
The economy has been projected to grow at a remarkable 5.2 % with the identification of Agriculture and Information communication technology sectors as lead organs pivoting the 2012 growth. In addition, Stability of both domestic and international markets is another factor attributable to the positive gesture. To capture this stability, developed economies are expecting a growth rate of up to 1.7%, while the developing economies are looking at a 6% growth rates in the year, 2012. Sound positioning of the economy will help it harness from the stability of both the domestic and global markets and institutions.
The opening up of the economy is crucial to the growth and development of a country. It helps producers’ access markets with much ease without unnecessary increase in costs. To address this, the government todays budget looked to scale up the investment of infrastructure. In the 2012/2013 budget for example, infrastructure was allocated a lion share of 268 billion. This move is feasible as there is urgent need to improve transport and communication network in the country to align the economy with its short and long-term development plans i.e. the MDGs and the Vision 2030 respectively.
The identification and subsequent assignment of funds to vital sectors is something noteworthy in the 2012/2013 budget. Here are the figures, Irrigation – 8 billion, Agricultural Business fund – 1 billion, Railway upgrades – 1.45 billion, Education – 233.1 billion, Hiring 10,000 teachers – 8 billion, 1.1 billion for post primary bursary, Health sector- 85 billion. Although the figures are small, their impact will be felt directly by the over-taxed Kenyans. However, despite this generous government hand, the Taxpayer and local players i.e. the private sector needs to brace for tough economic times. First, let us examine the middle class Kenyan, one living in a big city. According to the budget, KRA will look to Map Estates i.e. the residential areas to document property owners’ rental incomes. This means that landlords will be taxed and due to the transfer effect, the tenant is the immediate casualty. To private sector players, the exchequer is looking to fund its deficit of 6.9% partially through domestic borrowing (106 billion shillings to be borrowed from the local market). That magnitude is large for our fragile economy to handle. With the need for private sector expansion, borrowing domestically by the government will rapidly increase the cost of doing business i.e. leads to increased interest rates. This is retrogressive and hampers the growth and development blue print.
Another thing to note in this budget is the ever-increasing expenditure, one that cannot be met by exchequer revenue. A budget is often made up of two expenditures, the Recurrent and Development expenditure. Recurrent expenditure are funds set aside or borrowed (Mostly in Kenyan case), to cover for the salaries of civil servants. On the other hand, Development expenditure are funds (often meager) assigned for development purposes i.e. for the erection of important facilities that help spur growth and development of a state. In the year 2012/2013 budget for example, out of the estimates total budget of 1.45 Trillion Kenya shillings, only 451.7 billion was allocated for development purposes. From the figures, it is apparent that the recurrent expenditure enjoys the lion’s share of the national budget.
In winding up, the government needs to look into ways of operating within its means. Tax gaps need to be addressed to ensure that few Kenyans are not overtaxed while others escape tax claws. In addition, the exchequer needs to devise ways of bringing down recurrent expenditure without necessarily laying off employees. One measure is to ensure that individuals are paid same proportion to the service they offer or idea they’ve created.