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The 2018 budget speech in full

Thursday, June 14, 2018 — updated on December 21, 2020 - 70 min read

Treasury Cabinet Secretary Henry Rotich reads the 2017/2018 budget speech at Parliament on March 30, 2017. FILE PHOTO | NMG

By BD REPORTER

BUDGET STATEMENT FY 2018/19

Creating Jobs, Transforming Lives and Sharing Prosperity

• During the past five years our economy has expanded by an average rate of 5.6 percent per year outperforming the average growth rate of the previous five years (2008-2012) and that of the global economy and of sub-Saharan Africa. We are now relishing the benefits of an expanded economy that is more competitive and well rated not only in the East African region but also in the whole of Africa;
• We have completed phase 1 of the Standard Gauge Railway (SGR). Today, Kenyans are enjoying cheaper and faster travels between Mombasa and Nairobi using Madaraka Express. In addition, the SGR freight service that started in January 2018, has facilitated cheaper movement of goods, with the monthly loads increasing from the initial 22,345 metric tonnes to an impressive 213,559 metric tonnes, a ten-fold increase in only a few months;
• We have expanded our energy generation capacity through investment in green energy;
• Today, 6.7 million Kenyans have been connected to electricity compared to 2.3 million in 2013;
• Security has been substantially improved throughout the country thanks to our strategic investment in police and military modernization;
• Our tourism sector continues on a recovery path largely due to the improved security in the country and effective tourism promotion strategies;
• We have significantly eased the burden of medical expenditure. As a result, more Kenyans are accessing specialized treatment than ever before;
• We have also made education more inclusive and sensitive to the country’s skills demand by; (i) expanding the free education program to include free day secondary school education; (ii) introducing a new curriculum that focuses on nurturing talents; and (iii) delivered new and upgraded technical training institutes across the country; and finally
• More vulnerable Kenyans are benefiting from cash transfers, especially our senior citizens, orphans and vulnerable children, and persons with disabilities.

• We have a Government and a President who is fully committed to this resolve; We have a favourable global economic and trading environment;
• Our domestic economic outlook is bright;
• We have a fiscal plan that supports growth, provides funds for our devolved government, while ensuring our debt remains sustainable;
• Our exchange rate, interest rates and inflation outlook are stable;
• We have development partners that are ready to provide both financial and non-financial support;
• We have foreign investors knocking on our doors and eager to invest in our country;
• We have creative and enthusiastic home-grown entrepreneurs ready to expand their opportunities; and above all
• Our political environment has improved significantly over the recent months, thanks to the “handshake”.

Mr Speaker, given the competing needs for our limited resources, we have had to make tough choices. We have curtailed resources going to lower-priority areas following the zero-based budgeting approach that we have adopted. This has enabled us to redirect these savings toward “The Big Four” and their enablers, while continuing with pro-poor expenditures in health, education and protecting the vulnerable. We are clearly conscious of our limited fiscal space and we will be leveraging on the partnership between the private sector and the Government to deliver most of “The Big Four” requirements. Overall, we have moderated our spending and ensured cautious revenue projections, so as to limit borrowing. Obviously, there are risks and spending pressures that we will need to manage prudently.

Mr Speaker, despite the extremely difficult circumstances we faced as a country last year, we were able to preserve macroeconomic stability with inflation, interest rates and exchange rates remaining largely stable throughout 2017. This serves as a clear demonstration to domestic as well as foreign investors of our commitment to maintain macro-economic stability, which is key in enhancing investor confidence. We intend to sustain this commitment in the years to come.
Mr Speaker, we will continue to improve the environment for businesses to thrive, deal decisively with corruption and address the governance and performance challenges at our parastatals and State-linked companies, as well as improve efficiency in our financial sector. All these measures will boost investments and create the much needed jobs.

Customs Measures
Mr. Speaker, during the East African Community (EAC) Pre-Budget Consultations meetings, we agreed on Customs duties aimed at promoting industrialization, encouraging local investments, and creating incentives in the agricultural and manufacturing sectors. The measures are also intended to make our products more competitive while at the same time protecting local industries from unfair competition. Mr. Speaker, details of the Customs measures will be communicated through the EAC Gazette and implemented from 1st July this year. I will highlight a few of them.
Mr. Speaker, our iron and steel industry is facing stiff competition from imported cheap and subsidized iron and steel products. In order to protect the local iron and steel industries, I have increased the rate of import duty from 25% to 35% in a wide range of steel and iron products which are available in the region.

Infrastructure
Mr. Speaker, with regard to infrastructure as an enabler, to further enhance movement of Kenyans, and reduce the cost of transportation of goods, I have allocated a total of Ksh 115.9 billion for on-going road construction projects, and Ksh 74.7 billion for the construction of Phase 2A of the SGR. I have also allocated Ksh 2.7 billion for the Mombasa Port Development Project, and Ksh 1.4 billion for the expansion of Malindi, Isiolo and Lokichogio Airports and Kabunde, Kakamega, Kitale and Migori Airstrips. In addition, I have set aside funds for emergency repair of roads damaged by the recent floods across the country. I will also be engaging our development partners towards mobilizing additional resources for the same purpose.
Mr. Speaker, to support generation of adequate and affordable energy, I have allocated, Ksh 12.7 billion to support the exploration of geothermal, wind and solar resources, and Ksh 4.8 billion for the exploration and distribution of oil and gas.

Concurrently, Mr. Speaker, we are working with our private sector partners to develop the necessary infrastructure to evacuate and achieve early monetization of our crude oil resources. In this regard, work is on-going for; (i) the development of the Upstream facilities which include drilling of over 200 production wells and the installation of the necessary oil drilling facilities to allow the flow of 60,000 – 80,000 barrels of oil per day; (ii) the development of the proposed 821km crude oil pipeline from Lokichar oil fields to Lamu; and (iii) the export facilities at Lamu. As this is a commercially viable project, we plan to deliver it on a project finance basis without recourse to public debt. The Government will, however, invest as a shareholder in the integrated project and will provide public sector facilitation as necessary.

Mr. Speaker, a key enabler for achieving the big four is eradication of corruption. Without vigorously addressing corruption we will not achieve our aspiration of becoming a Middle income country with a high quality of life. It is critical, therefore that each arm of Government - the Legislature, Judiciary and the Executive play its role firmly and without fear or favour.
Mr. Speaker, the new Constitution provides for independent institutions, Commissions, and institutions dealing with Governance. We have strengthened the Multi Agency team enabling them investigate, prosecute and recover corruptly acquired assets. Additionally, we have enhanced the oversight and legislative role of Parliament and access to Justice, by allocating Ksh 36.8 billion to Parliament and Ksh 15.2 billion to the Judiciary.

Allow me Mr. Speaker, to share some of the major highlights of the Public Procurement and Asset Disposal Regulations, which provides for;
• One, establishment of common user agency that will facilitate and manage the procurement of standard goods/ items. This is aimed at reaping economies of scale while minimizing expenditure and having standard pricing on such items;
• Two, enhancement of the e-procurement platform to improve efficiency and effectiveness, accountability and transparency in the procurement processes;
• Three, provisions to facilitate prompt payment for performed contracts within 60 days upon proper certification of the same;
• Four, provisions for firms that supply manufactured articles, materials or supplies wholly produced or mined in Kenya to enjoy various margins of preference in procurement evaluation (Buy-Kenya-build Kenya policy);
• Fifth, margin of preference shall also be extended to local contractors/suppliers where Kenyans are shareholders and offering goods manufactured, assembled, mined, extracted or grown in Kenya.
To this end, all accounting officers of procuring entities are required to procure items manufactured in Kenya to embrace the buy-Kenya-build-Kenya initiative. Where an accounting officer is unable to procure items wholly or partially manufactured in Kenya, he/she shall cause a report detailing evidence of inability to procure such items;

Mr. Speaker, to create a more robust framework for the implementation of PPP projects the Government intends to revamp the PPP Unit with the aim of speeding up the pace of project preparatory activities, while being mindful of the need to ensure projects are well prepared, and all considerations required by law are taken into account. In this regard, we have completed a review of the PPP ecosystem and undertaken a legal audit of the PPP Act 2013. This work informed the need for amendments to various statutes which are before this august House. The proposed amendments focus on project land acquisition and reduction of the bureaucracy associated with PPP project development.
We shall also be undertaking administrative actions aimed at speeding up project turnaround times. These include (i) establishing shortlists of advisory service providers (ii) standardising project documents and (iii) resourcing the capacity of the PPP Unit to deliver its mandate.

Mr. Speaker, as you recall in the year 2016, I introduced amendments to the Retirement Benefits (Individual Retirement Benefit Schemes) Regulations and the Retirement Benefits (Occupational Retirement Benefit Schemes) Regulations in order to provide for establishment of a medical Fund into which members can contribute during their working life and the same be used to purchase medical cover upon retirement. To further promote this policy and support Universal Healthcare under “The Big Four” Plan, I propose to introduce amendments to the same Regulations to allow members who are unable to build medical funds during employment to utilize a portion of their retirement benefits for post-retirement medical cover. I further exempt the same Fund from the retirement benefit levy in order to boost the member’s contribution.

Mr. Speaker, our sincere thanks also go to the following:-
You, Speaker of the National Assembly and the Speaker of Senate, together with your respective Clerks for facilitating the approval process of Budget Estimates for the FY 2018/19 and other budget documents in Parliament;
Members of the Budget and Appropriation Committee led by the Chairman, Hon. Kimani Ichung’wah and the other Departmental Committees of the National Assembly for the time and dedication in sifting through the Estimates and constructive debates that helped refine the Budget;
Majority Leaders of both Houses, Hon. Adan Duale and Hon. Kipchumba Murkomen, for the robust support of the Government Economic agenda during the legislative debates;
Members of the Finance and National Planning Committee led by the Chairman, Hon Joseph Limo and other Departmental Committee of the Senate for the constructive engagement on budget and finance matter;
All members of the National Assembly and Senate for their cooperation in facilitating legislative proposals in support of budget preparation and implementation;
Members of the Intergovernmental Budget and Economic Council (IBEC) for the support and cooperation in Intergovernmental finance matters;
Management and staff of the National Treasury and Planning under the able leadership of the Hon. Nelson Gaichuhie, the Chief Administrative Secretary, and Dr. Kamau Thugge, the Principal Secretary, National Treasury, who have tirelessly worked long hours, including most weekends to ensure that this budget and supporting documents meet the legal deadlines; We appreciate your deep commitment to public service;
Management and staff of the Central Bank of Kenya and the Kenya Revenue Authority for their contributions;
Staff from the Attorney General’s Office;
Staff of the Parliamentary Budget Office for providing support and insightful comments throughout the budget process; and
Our bilateral and multilateral development partners, as well as our private sector for their contribution to our development agenda through their technical and financial support.
I must also thank my family for their support and inspiration.

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The 2018 budget speech in full

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