Rotich’s Sh2.7 trillion budget plan signals higher taxation

National Treasury Cabinet Secretary Henry
National Treasury Cabinet Secretary Henry Rotich. Trillion budget plan signals higher taxation. FILE PHOTO | NMG 

The National Treasury Cabinet Secretary Henry Rotich is set to retain his expansionist policy through the next financial year, enlarging the budget by 7.6 per cent to Sh2.7 trillion as the State seeks to put more money in education and public administration.

Mr Rotich’ spending plans seek to pump Sh1.66 trillion into recurrent expenditure between July 2019 and June 2020, while development projects get Sh670.8 billion.

Counties’ expenditure is projected at Sh371.6 billion, with an additional Sh5 billion going toward the contingency fund.

The higher budgetary expenditure is, however, likely to result in increased taxation for Kenyans given that the government is still under pressure to cut the rising amount of public debt. The state may also achieve the higher revenue target by widening the tax net and sealing loopholes.

The Treasury says, in the draft 2019 Budget Policy Statement, that it expects total revenue to rise 13.6 per cent to Sh2.08 trillion in the coming fiscal year, which will reduce the budget deficit year-on-year from Sh635.5 billion (6.3 per cent of gross domestic product (GDP) to Sh572.2 billion (five per cent of GDP).


“To finance the fiscal deficit in the fiscal year 2019/20, domestic borrowing is projected at Sh271.4 billion, foreign financing at Sh306.5 billion and other domestic financing at Sh5.7 billion,” said the Treasury in the budget statement.

“Revenue performance will be underpinned by ongoing reforms in tax policy and revenue administration.”

The higher budget target will put pressure on the Kenya Revenue Authority to improve its revenue collection in the face of tough economic times.

The Treasury also faces pressure to further consolidate spending, especially on the recurrent side.

The education sector has been given an allocation of Sh474 billion, an increase of Sh32 billion from the current fiscal year, while public administration funding has risen Sh23 billion to Sh272 billion.

Mr Rotich says in the budget statement that the education sector will in the next three fiscal years prioritise recruitment of additional teachers to support the 100 per cent transition policy of the government.

Additional funds will go towards free primary and day secondary education taking into account the ever rising number of students, as well as construction and equipping of technical training institutes to supplement universities.

The government is, however, planning to spend less in the energy, infrastructure and ICT sector, whose overall budgetary allocation is expected to fall by Sh7 billion to Sh411.3 billion in 2019/2020.

To cut expenditure, the Treasury has indicated it will prioritise completion of projects that have already began, and will increasingly look towards the public private partnership model to finance large projects to ease the pressure on public debt.

The governance, justice, law and order sector has been handed an additional Sh10 billion in the draft budget, taking its 2019/20202 allocation to Sh200 billion.

These funds are expected to finance police reforms, improve security surveillance in the major urban centres in the country and the fight against corruption.