https://www.the-star.co....-years-revenue_c1769234
The government will use half of the revenue collected next year to pay debts.
According to proposals by the Budget and Appropriations Committee, at least Sh962.5 billion — 50 per cent of domestic revenue — will be used to pay both local and foreign debts.
The proposed 2018-2019 budget is Sh3 trillion, up from Sh2.6 trillion.
The high debt obligation has forced the government to reduce the budget deficit from 7.2 per cent to three per cent in line with the East African Community agreement.
"The general direction on fiscal consolidation is to address deficit financing to reduce the rate of accumulation of public debt, while ensuring priority programmes are ring-fenced. To achieve a lower deficit, the budget should be based on realistic revenues," committee chairman Kimani Ichung’wah said.
The proposed spending will increase the national debt, already at Sh4.57 trillion.
The national government will spend the biggest chunk of the resources. It has been allocated Sh1.68 trillion, while the 47 county governments will get Sh372.7 billion.
The Judiciary has been allocated Sh17.8 billion — Sh2.5 billion for development has been slashed. Planned expansion of county courts is likely to take a hit.
After the Supreme Court nullified Uhuru's election, many Jubilee MPs vowed they would take revenge at budget time and punish the Judiciary.
Parliament's allocation is Sh42.5 billion, while Sh962.5 billion will be set aside for the Consolidated Fund to pay government loans.
Domestic revenue will account for Sh1.92 trillion of the total budget, of which the Kenya Revenue Authority expected to collect Sh1.74 trillion from ordinary taxes and Sh179.9 billion will be from financial assistance.
With the government expected to rely on international grants totalling Sh47 billion, available revenue will rise to Sh1.97 trillion.
As President Uhuru Kenyatta intensifies the war on corruption, MPs have slashed the budget for the scandal-ridden National Youth Service budget to Sh13.8 billion — down by Sh8.25 billion. The Treasury had proposed Sh22 billion.
The cuts will affect programmes at the heart of Uhuru’s flagship projects.
The Interior ministry has also been hit hard. The proposed budget calls for a Sh600 million reduction from the national Secure Communication and Surveillance System. This means that the police departments’ plan to instal CCTV cameras across major roads and towns will be hobbled.
MPs proposed a Sh20 million cut in Harambee House's budget.
The committee recommended a 25 per cent reduction in recurrent expenditures for the Teachers Service Commission, technical education, university education, post-training and skills training. These cuts amount to a saving of Sh215.4 million.
In a major blow to disadvantaged families in vulnerable areas, the MPs proposed a Sh300 million reduction in the School Feeding Programme.
School infrastructure improvement would be limited after lawmakers deducted Sh560 million from the project.
MPs have raided the National Treasury, deducting Sh5 billion from the Pension Fund, while KRA will lose Sh828 million as MPs tighten belts to fund Jubilee’s massive budget.
In a move to control runaway government expenditures, the lawmakers want Parliament to approve any government expenditure above Sh1 billion.
"Given the large projects being initiated by the national government — with contractual agreements which Parliament only gets to know later —any contractual agreement worth more than Sh1 billion should be pre-approved by Parliament by July 1," Ichung’wah said.
In a major shift from tradition, the budget committee has recommended where the executive needs to allocate money to address problems of citizens in various counties.
In Kajiado county, the committee wants Sh15 million allocated to Kajiado East and Sh20 million to Kajiado South for water pans to contain flood water. They would be used for irrigation and livestock .
In Marsabit, Sh20 million is be allocated to each of the four constituencies to drill boreholes and build earth dams. In West Pokot, Sh100 million has been allocated for feasibility studies, design and land compensation or construction of Amparo dam.
The MPs want money set aside to to construct all-weather roads in various constituencies.
In Nairobi county, the MPs have allocated Riruta-Kawangware Road Sh60 million. In Nyamira, each of the three constituencies has been allocated Sh10 million. Migori gets Sh10-15 million.
Although Kenya aims for a budget deficit of 5.7 per cent, down from 7.2 per cent, it will be forced to finance the Sh562.7 billion deficit through borrowing.
DEBT
Total debt service is expected to reach Sh870.6 billion, including repayment of Sh194 billion in the form of principal payments for the tap sale component of the 2014 sovereign bond and two syndicated bonds.
The high domestic debt, currently at Sh2.2 trillion, is expected to mature within the year.
The committee warned that if deficit current trend continues, a lower deficit will continue to be a moving target.
If deficit spending continues the country may not achieve the EAC monetary convergence to bring the deficit down to three per cent by 2021, leading to further accumulation of debt.
While presenting budget estimates to Parliament last month, Treasury CS Henry Rotich said the government is working to reduce external debt pressures by adopting alternative financing models, like public-private partnerships.
"This reduction will strengthen our debt sustainability position. We have carefully evaluated our external and domestic debt to ensure we are in a position to service the same," Rotich said.
He also promised to strike a balance between external and domestic borrowing, targeting Sh282.5 billion and Sh276.1 billion for external and internal borrowing, respectively.
The budget committee said: "The borrowing ratio of 50 per cent for external and 50 per cent domestic borrowing as contained in the proposed 2018-19 budget deviates from initial borrowing ratio under the Medium Term Debt Management Strategy (MTDS), which proposes a ratio of 57:43 for external and internal borrowing, respectively. This implies an increasing focus on manageable domestic borrowing."
Rotich will have daunting task to explain to Kenyans how he plans to deal with ballooning public debt when he presents the budget to Parliament next Thursday.
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