County to spend less on development

The government has scaled down its development spending plans for the financial year ending this June while increasing recurrent expenditure, a move faulted by economists.  

National Treasury Cabinet Secretary Henry Rotich has slashed the state development expenditure by Sh49.1 billion while expanding the recurrent budget by Sh8.1 billion in supplementary budget estimates tabled in Parliament on Tuesday.

Economists have criticised the National Treasury’s decision to cut the development budget arguing that this would affect the country’s economic growth prospects.

“It means the expansive ability of the economy will reduce because when you put money in development you create an environment to grow faster as opposed to consumption,” said Dr X.N Iraki, a senior lecturer at the University of Nairobi.

The government has been grappling with falling tax revenue and it also missed its target on borrowing, resulting in the cash crunch that has forced the current review.

The cut of the development expenditure signals less cash in the hands of contractors and will result in a slowdown in demand of manufactured products such as steel and cement. Government supplies are also likely to be hit hard by delayed or non-payment for goods and services delivered.  

Mr Rotich reneged on his promise to cut recurrent expenditure by up to Sh23 billion, which he had termed “non-productive costs.”

The ministry of Education took the heaviest cut with its budget scaled down by Sh14 billion, allocated largely to the department of basic education under which the school laptops project falls.

Road construction projects were cut back by Sh3.9 billion, of which Sh2 billion was meant for “major roads”.

The National Youth Service (NYS), which has been associated with massive looting of funds, had Sh7.5 billion withdrawn from it.

Under President Uhuru Kenyatta, the NYS budget has grown more than four-fold. However, this coincided with corruption schemes perpetuated by senior officials resulting in the loss of funds estimated to be as much as Sh2 billion.

Teachers were the top gainers in the revised budget with TSC’s recurrent budget being expanded by Sh6.8 billion.

Teachers have been agitating for a salary increment and are currently in negotiations with the commission on a collective bargaining agreement (CBA).

The ministry of Information, Communication and Technology was a surprise gainer with its development budget expanded by Sh6.3 billion.

The country’s agriculture budget was slashed by Sh10.5 billion despite agriculture being touted as the backbone of Kenya’s economy. The National Irrigation Board’s expenditure plans have been cut by Sh9.6 billion.

The cut in the country’s spending plans follows Kenya Revenue Authority (KRA) falling behind tax collection targets by a massive Sh47.6 billion as at the end of December.

The taxman attributed the below par collections to salary-based taxes, Pay-As-You-Earn (PAYE), which fell short by Sh26 billion and a Sh15.9 billion shortfall in Value Added Tax (VAT) collection from imports. This follows staff retrenchments and salary and bonus freezes by large corporates that are facing harsh market conditions.

A record 18 listed companies have issued profit warnings, indicating that their profits will fall by at least 25 per cent this year, signalling lower corporate taxes.

A spike in interest rates last year also forced the Treasury to slow down its borrowing programme.