Taxpayers feel full weight of new laws in Sh1.4tn budget
Spending on the military accounts for the largest increase in the 2012/2013 budget at Sh70 billion. FILE
The breakneck growth in Kenya’s public spending will stay on course in the next financial year – taking the national Budget to a record Sh1.45 trillion, according to estimates that the Treasury tabled in Parliament Thursday.
At Sh1.45 trillion, Kenya’s Budget will have more than quadrupled in the 10 years of President Kibaki’s administration.
The entire public spending, including the Legislature, the Judiciary and money allocated to independent offices from the Consolidated Fund in the year that begins in July 2012 will be Sh300 billion more than the current year’s.
The Treasury’s budget office said the expansion is mainly driven by higher spending on recurrent expenditure, comprising salaries and mandatory allocations to independent offices created by the Constitution as well as debt repayments.
The Budget, which is 26 per cent higher than this year’s, shows that the single largest portion of the increase comes from the Consolidated Fund Services (CFS), the account through which the government makes payments to constitutional offices and services public debt.
“We had a larger national budget because we had to factor the increase in CFS that contains payments to constitutional offices and debt,” said Henry Rotich, the deputy director of economic affairs at the Treasury. “The figure is different from what was contained in the Budget Policy Paper because we had not factored in the commitments from donors that we have now received since we prepared the policy statement.”
The CFS-driven Budget expansion also reflects the heavy debt burden facing the taxpayer following recent heavy government borrowing from both local and foreign markets.
At the end of March, the total interest repayments on public debt stood at Sh56 billion, having more than doubled from November last year, according to data from the Central Bank of Kenya.
The ballooning of the CFS account is also linked to the huge and rapidly growing public pension obligations that will rise to Sh38 billion in the next financial year.
The Treasury said in the latest Budget Policy Statement (BPS) that the government will gradually move its employees to a defined contributory pension scheme – where they and their employer will make monthly contributions.
All public officers currently enjoy a defined benefit pensions scheme that leaves the state with the entire burden of taking care of retired staff.
The setting up of county government expected next year, the war in Somalia, the general elections as well as the numerous offices set up under the new constitution have also made their mark in the next year’s Budget.
The war in Somalia has significantly raised the defence forces expenditures as has been the recent salary awards to teachers and doctors that have helped push up the recurrent expenditure.
The defence forces make the single largest increase in the government’s recurrent expenditure budget at Sh70 billion -- a 55 per cent increase from this year’s Budget.
The second largest recurrent expenditure item is the Ministry of Medical Services that will receive Sh11 billion more for a total of Sh39 billion.
The increase goes to paying the salary awards given to doctors who went on strike last year demanding higher salaries and allowances.
Mr Rotich said foreign financing of the Budget had risen to about Sh170 billion from about Sh88 billion, which had not been anticipated at the time the BPS was made.
“There are some differences with the BPS because it was prepared earlier. So the estimates now show the updated financial affairs of the country. And that is among the reasons the Budget has grown larger compared to the time when we released the BPS,” said Mr Rotich.
The net domestic borrowing of Sh106.7 billion stated in the BPS had not changed but external financing had risen, making the net funding gap to be filled to about Sh276 billion – Sh40 billion higher or a 17-per cent growth growth over 2011/12 fiscal year.
In the BPS, the net total deficit was Sh167.4 billion. Among the new items on the list is the allocation of Sh235 million for the Witness Protection Agency. On the recurrent estimates, the Independent Electoral and Boundaries Commission has been allocated Sh17.6 billion.
Constitutional reforms have been allocated Sh3 billion for the 2012/13 fiscal year under the development budget.
The Judiciary’s recurrent budget – mainly salaries and other emoluments – has grown massively by 84 per cent to Sh12.5 billion, reflecting the new reforms being implemented following the new Constitution.
The development budget of the Judiciary grew by 13 per cent to Sh2.86 billion from this financial year.
The Integrated Financial Management Information System, which is intended to improve the links among various ministries to enable real-time update of financial data, has been allocated slightly over Sh1 billion on both the development and recurrent sides.
