Treasury and National Planning Cabinet Secretary Amb. Ukur Yatani presenting the national budget in the National Assembly on June 10, 2021. PHOTO | JEFF ANGOTE | NMG
The Treasury’s supplementary budget estimates presented to Parliament on Tuesday indicate fresh allocations of Sh26.5 billion to the national carrier and other undisclosed expenditures.
The Treasury had targeted offering Kenya Airways Sh53.4 billion in direct budget support in the fiscal year that ends in June 2022 as well as the subsequent one, making it the largest corporate bailout.
Without State aid, the airline risked running out of money in the near future against the background of unease among banks about lending to African carriers.
Kenya Airways’ #ticker:KQ bailout, petrol subsidy and payments for Covid-19 vaccines topped the list of unforeseen expenditures that will see taxpayers spend Sh108 billion more in the budget for financial year ending June.
The Treasury’s supplementary budget estimates presented to Parliament on Tuesday indicate fresh allocations of Sh26.5 billion to the national carrier and other undisclosed expenditures, Sh24.9 billion to fuel subsidy, Sh9.1 billion to prepare for the August General Election and Sh8.5 billion to Covid-19 vaccines.
This has seen a 3.3 percent jump of the national budget from the original plan presented in April last year, widening the budget deficit further.
“The overall change in the national government ministerial budget, excluding the consolidated fund services and county allocations, from the original approved budget is an increase of Sh126.3 billion,” Treasury Cabinet Secretary Ukur Yatani told Parliament.
He attributed the increase to expenses linked to the elections, Covid-19 expenditures, including Sh1.3 billion for building a vaccines plant, and the bailouts.
This increased the budget deficit from the original projection of 7.5 percent of gross domestic product (GDP) to 8.1 percent, signalling additional borrowing to plug the financing hole.
The Treasury had targeted offering Kenya Airways Sh53.4 billion in direct budget support in the fiscal year that ends in June 2022 as well as the subsequent one, making it the largest corporate bailout.
The national carrier needs money for the maintenance of grounded planes, payment of salaries and settlement of utility bills such as security, water, electricity and parking as well ease the effects of the virus that has obliterated global demand for travel.
Without State aid, the airline risked running out of money in the near future against the background of unease among banks about lending to African carriers.
The bailout comes as the State dropped the favoured long-term solution for the ailing Kenya Airways that was anchored in nationalisation of the airline.
The nationalisation plan approved by lawmakers in July 2019 would have led to the delisting of the airline from the Nairobi Securities Exchange (NSE).
Payments to oil marketers to keep fuel prices unchanged in the monthly reviews have cost the Treasury Sh24.9 billion more.
The subsidy was meant to cushion motorists from rising global fuel prices on the back of a speedier than expected economic recovery as vaccines are rolled out.
Without the subsidy, super petrol would have hit a historic high of Sh144.47 a litre from the current Sh129.72, diesel Sh128.44 a litre from Sh110.6 and kerosene Sh123.77 from Sh103.54 a litre in what would have reignited public anger over high cost of living.
Oil dealers who sought anonymity for fear of State reprisal have been complaining that the State has not fully compensated the full costs incurred in the importation of fuel.
The State tapped funds from the fuel subsidy scheme that is supported by the Petroleum Development Levy (PDL).
PDL is raised from fuel consumers and was increased to Sh5.40 a litre in July last year from Sh0.40, representing a 1,250 percent rise.
The Treasury sought fresh approval of Sh8.5 billion for buying Covid-19 vaccines under a plan supported by the World Bank, which boosted Kenya’s target to inoculate 10 million people by December.
About 6.58 million Kenyans, out of 47 million, have had a first jab and 5.63 million are fully vaccinated, according to the Ministry of Health.
The World Bank financing helped Kenya buy vaccines through an African Union facility set up for that purpose, as well as through COVAX, the global scheme for sharing vaccines equitably.
The cash was also be used to boost Kenya’s cold chain facilities for storage of vaccines, training of health personnel and other associated activities.
Kenya on October 20 lifted a nationwide curfew that had been in place since March 2020 to curb the spread of the coronavirus on falling infection rates and the vaccinations.
The country last month invited firms through a global tender to bid for the construction of a Covid-19 vaccine plant.
The plan to manufacture jabs locally has prompted the budget to increase by Sh1.3 billion.
The Treasury has allocated an additional Sh8.8 billion for the electoral commission and Sh324 million more to the political parties registrar to meet the shortfall needed to conduct the August General Election.
