Treasury falls short of third quarter tax target by Sh48bn

The Treasury fell short of revenue collection target by Sh47.7 billion at the end of the third quarter of the 2011/12, an official report issued at the weekend shows.

Statistics in the Third Quarter Economic and Budgetary Review indicate that the cumulative revenue collection as at the end of March amounted to Sh504 billion against the target of Sh552.5 billion representing a shortfall of Sh47.7 billion.

The cumulative expenditure and net lending in the same period amounted to Sh646.7 billion, which is Sh152.3 billion below the target of Sh798.9 billion.

The variance was largely attributed to low absorption in the development expenditure amounting to Sh115 billion.

The Kenya Revenue Authority (KRA) missed the target for ordinary revenue by Sh34.9 billion, netting Sh465.2 billion against a target of Sh500 billion.

This was attributed to the revenue shortfall in the value added tax, excise duty, import duty and other tax categories.

The third quarter review report Finance minister Njeru Githae tabled in Parliament shows that the overall fiscal balance on a commitment basis excluding grants amounted to a deficit of Sh141.9 billion compared with Sh109.1 billion during a similar period in 2010.

The government paid out Sh776.1 billion against the projected target of Sh937.2 billion in guaranteed loans.

External financing amounted to a net borrowing of Sh27.3 billion compared to Sh18.9 billion in 2010/11 fiscal year.

The report states that the net domestic financing declined to Sh107 billion compared to the target of Sh120.7 billion.

During the period, the Treasury found it increasingly difficult to raise funds from the money markets due to high interest rates resulting in the Sh54 billion dollar denominated loan last week.

“On gross terms, domestic borrowing was Sh88.4 billion against the revised overall annual fiscal year’s borrowing target of Sh114.2 billion. About Sh52.1 billion (using earlier exchange rate) of this is expected to be borrowed externally by way of a syndicated loan from international banks,” the report says.

Domestic debt increased by 16.2 per cent from Sh764.2 billion at the end of June 2011 to Sh887.9 billion by the end of the quarter. External Debt on the other hand stood at Sh676.3 billion.

The increase in overall public debt is attributed to increased disbursements in the quarter under review and the changes in the exchange rate, which stood at Sh83.06 to the dollar.

At the end of March, the government scheduled debt service amounted to Sh25.8 billion.

During the quarter under review the report says inflation eased to 15.6 per cent in March from 18.3 per cent in January reflecting improved food supplies and stable exchange rate.

Foreign exchange reserves held by the Central Bank of Kenya rose slightly to $4,435 million by the end of February from $4,118 million during the same period last year.