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Budget has glaring inconsistencies

budget read

National Treasury Cabinet Secretary Henry Rotich poses for a photo outside The National Treasury Building ahead of the 2018/19 budget presentation at Parliament on June 14, 2018. PHOTO | DIANA NGILA | NMG

Should we call a lie a lie? When is a lie a lie?” That is a question celebrated novelist Chimamanda posed to the Harvard Class of 2018, expounding that the act of lying has gained much political potency in America that it somehow feels apt.

Kenya also seems to be sharing from the same potency. One thing the CS of Treasury failed in this year’s budget statement is telling the taxpayer the truth. Instead, he chose to deploy creative macroeconomic accounting to intentionally mislead the taxpayer about this year’s budget.

He presented total expenditure in the FY 2018/19 budget as Sh2.55 trillion when the true reflection is Sh3 trillion. He went ahead to break it down as Sh1.55 trillion for recurrent expenditure, Sh625 billion for development expenditure and finally Sh376.4 billion to be transferred to county governments, but surreptitiously left out debt payments of about Sh470 billion under the Consolidated Fund Services to make the budget look small.

It seems to have been forgotten at the Treasury that it is a constitutional right of citizens to know every detail of government expenditure because even debt used to finance government spending is simply deferred taxes - taxes that will be paid in the future as debt repayment.

Second, after getting away with reporting total expenditure as Sh2.55 trillion, the Treasury was able to suppress our fiscal deficit for the FY 2018/19 to 5.7 per cent of GDP when the actual figure is 10 per cent. Total projected revenue is 1.949.2 billion inclusive of Appropriations in Aid and another Sh47 billion from donor grants brings the deficit amount just above Sh1 trillion not Sh558.9 billion.

Using the Treasury’s net present value figure of our GDP 9.7 trillion, weighted figure in their GDP analysis, the overall fiscal deficit comes to 10 per cent.

Apart from the creative macroeconomic accounting, there are quite a number inconsistent policy positions in the FY 2018/19 budget statement.

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First is the duty waiver on clean cooking stoves with the CS acknowledging the fact that majority of Kenyans rely on firewood for cooking citing its negative impact on forest as well as health effects, therefore production of clean energy cooking stoves needs to be promoted.

What was missed is that the same majority who use firewood for cooking are the same ones who use kerosene lamps due to its affordability for lighting. Therefore, increasing duty on kerosene is to send a mixed signal to this group of taxpayers.

Second, the CS in his statement praised Kenya for ratifying the African Continental Free Trade Area (AFCFTA) stating that this new trading frontier will enhance Kenya’s trade prospects in the region.

But he went ahead to heighten tariff barriers by increasing import duty on steel and iron products, paper and paper boards that are produced within the region.

It would have been proper for Kenya to maintain current tariffs until an implementation roadmap is agreed upon as a show of commitment to the agreement.

READ: Budget 2018: The highlights

Lastly, the proposal of amending the Employment Act so as to allow employers contribute 0.5 per cent of employees’ gross monthly emolument to go to the National Housing Fund is pretty similar, in principle, to introducing withholding tax.

Such missions of imposing the will of the State on people through mandatory contribution for running of statutory bodies have only bred inefficiency and corruption. We continue to witness similar statutory bodies like NSSF and NHIF running recurrent costs of more than 55 –60 per cent of their revenue, entirely defeating the purpose of their existence.

Also, this proposal is an attack on employees’ economic democracy – employees’ setting out to make whatever choices they wish with their salaries on how to maximize their own well-being.

The constitutional idea of Kenya organising as a free-market democracy actually means that we start at respecting and upholding individual’s free will first and not the State’s will.