SGR, double-decker road force Sh3trn mini-budget

Unpaid standard gauge railway (SGR) bills, provision of universal health care and construction of Kenya’s first double-decker road has forced the Treasury to review and increase the budget for the year starting July by Sh86 billion.

The Treasury on Tuesday sought MPs’ approval to increase spending by 2.8 percent to Sh3.13 trillion in its 2019/20 budget, a parliamentary document showed.

The ministry wants Sh85.5 billion for spending on developmental projects and an additional Sh6.5 billion for counties in a budget review that will reduce recurrent expenditure by Sh5.6 billion.

The cuts on recurrent expenditure follow an order from the Treasury for ministries to slash budgets for lavish travel, advertising and trainings, which the government said were examples of wasteful spending.

“The recurrent expenditure decreased by 0.5 percent while development expenditure has increased by 12.2 percent. This is within the 10 percent threshold specified in the constitution,” acting Treasury Secretary Ukur Yatani said in a statement to Parliament.

The review of the budget comes at a period when the Kenya Revenue Authority (KRA) has missed tax targets in a business environment plagued by job cuts and reduced corporate profits.

Mr Yatani said Kenya experienced tax shortfalls of Sh60.2 billion in the three months to September and internal revenues from items like fines, payments for passports and marriage fees were below target by Sh24.4 billion.

The Treasury raised development spending through a mini-budget in what is aimed at spurring economic growth and jobs creation.

Projects set to benefit from the increase in projects spending include the SGR, roads, power plants and electricity transmission as well as the Big Four projects—which seek to boost manufacturing, food and nutrition security, affordable housing and universal health coverage.

The government remains the biggest buyer of goods and services and the increased project spending has an effect on economic growth, which is projected at 5.9 percent this year, down from 6.3 percent last year.

This has the effect of putting money in private hands through demand for raw materials, which ultimately creates new jobs and sales for corporate Kenya.

The Treasury is seeking Sh16.7 billion for the Mombasa-Nairobi SGR line, which was completed and launched in June 2017

This suggests that billions could be used for bills linked to running the railway line given the revenues generated from the line are inadequate for maintenance and payment of management fees to the Chinese firm operating the passenger and cargo businesses on the track.

About Sh7.3 billion has been allocated for the government’s share of the Sh59 billion required for the construction of Kenya’s first double-decker road set to link the Jomo Kenyatta International Airport (JKIA) to the Nairobi-Nakuru highway.

The Sh59 billion project would be financed under a public-private partnership (PPP). The China Road and Bridge Corporation (CRBC) is the investor and will recover its share of investment by charging fees for use of the road. Power transmission and distribution including unpaid bills for the Lake Turkana Wind Power Project will take Sh7.9 billion.

Universal health coverage—which will see the State provide subsidised health services—will be allocated an additional Sh21.9 billion, a pointer to the State’s intention to scale up the service beyond the four counties.

The Big Four projects that target universal healthcare, food security, manufacturing and affordable housing will get Sh11.8 billion more. Allocation to the counties has been increased by Sh6.5 billion to Sh316.5 billion from Sh310 billion, which had been rejected by the governors.