Budget seeks to boost growth, increase social spending and reform tax system

The National Treasury proposes to spend Sh866 billion on civil service salaries and Sh487 billion on development projects — including roads, railways and electricity connections — in the next financial year, according to the Budget estimates tabled in Parliament on Wednesday.

Another Sh320 billion will be used to repay debts. The allocation proposed for development expenditure has been increased to 36 per cent of the total expenditure projected at Sh1.8 trillion. Recurrent expenditure stands at Sh866 billion or 64 per cent of the Budget.

The estimates have made bold proposals aimed at attracting investment and improving the business climate as the government races to speed up economic growth.

Among the projects that will get significant allocation if Parliament approves the Budget estimates is the standard gauge railway which has been allocated Sh19.4 billion. The money is meant to set in motion the construction of the Mombasa-Nairobi segment of the line that will eventually end in Kigali, Rwanda, through Uganda.

Chinese Prime Minister Li Keqiang is expected in the country next week for a state visit and top on his agenda will be to sign the final agreement to finance the construction of the railway. China is to fund 85 per cent of the Sh327 billion project through a loan.

ROAD CONSTRUCTION

A total of Sh117 billion has been proposed to fund the ongoing road construction projects countrywide. Part of the money will be used to subsidise private investors who will be given major roads to build, manage and maintain. They will recover their investments by charging user fees. In total, transport and logistics has been allocated Sh125 billion.

Geothermal power generation has been allocated Sh10 billion as the government seeks to reduce the cost of electricity while also lighting up more homes and schools, especially in rural areas. The generation of more power is expected to reduce the cost of electricity by 20 per cent, hence increasing Kenya’s industrial competitiveness in the region, a move expected to spur more investments and create more jobs.

Kenya needs to cut its cost of power if it is to be competitive in attracting investment. Ethiopia’s cost of energy currently stands at US3 cents per Kw/h compared to Kenya’s US20 cents per Kw/h.
Besides geothermal projects, another Sh34 billion will be used to fund other power generating activities across the country.

Irrigation has been allocated Sh9.5 billion, with eyes on the one million Galana Kulalu irrigation project at the Coast, which was launched earlier in the year. The money will also be used to fund other ongoing irrigation projects countrywide and the transformation of agriculture from subsistence to commercial farming.

Under the project, 500,000 acres will be put under maize, 200,000 acres under sugarcane, 150,000 acres for livestock and wild animals, 50,000 under horticulture, 50,000 for dairy farming and 50,000 for fruit farming.

The Treasury has also proposed to spend Sh13 billion on flood control and water harvesting in the 2014/2015 financial year. Out of this, Sh8.2 billion will go towards the construction of water pans and dams.

“The continued implementation of robust economic policies and structural reforms as well as sound economic management is expected to yield efficiency and translate to faster growth and creation of more jobs,” reads the Budget summary.

Other major allocations include the Sh226.7 billion to be shared out to the 47 counties alongside an additional Sh33.4 billion for regional development.

Agriculture services will receive Sh53.3 billion.

Constitutional commissions will get Sh177.4 billion, with the Teachers Service Commission receiving the lion’s share of Sh165.7 billion. The Judiciary will get Sh18.5 billion and Parliament Sh19.2 billion.

To finance the Sh1.8 trillion — which will be the largest in Kenya’s history — the National Treasury expects the taxman to collect Sh1.17 trillion. This will be 20 per cent more than what the revenue authority targeted to collect this year.

“KRA is expected to institute measures to expand revenue base and eliminate tax leakages, modernisation of VAT legislation is expected to simplify tax collection and enhance the revenue yield,” said Mr Rotich in the estimates.