Budget slashed by Sh386b as Coronavirus pandemic bites

Wednesday, April 29th, 2020 00:00 |
Parliament in session. Photo/PD/FILE

 Key government departments are staring at huge budget cuts of up to Sh386 billion in the current financial year, attributed to effects of the Covid-19 pandemic, in what is projected to be a tough year for Kenyans.

The worst affected would be the Judiciary, Parliament, the Big Four agenda and the National Government Constituency Development Fund. 

The Big Four agenda is President Uhuru Kenyatta’s legacy projects which comprise food security, universal health care, affordable housing and manufacturing.

Among austerity measures the government has implemented is the halt of purchase of vehicles in the current financial year while the budget for training and procurement of furniture has been slashed by 50 per cent.

Also affected will be the newly-created Nairobi Metropolitan Services (NMS), which has not been allocated any funds because no request was made, according to documents seen by People Daily.

Locust invasion

The total budget is estimated at Sh2.72 trillion, out of which Sh1.8 trillion will be the recurrent expenditure while a measly Sh551.9 billion will go to development.

The budgetary cuts have also been attributed to the locust invasion, which has ravaged nearly 20 counties across the country, raising concerns about food security.

“These extraordinary happenings include drought witnessed at the beginning of the current financial year, unusually heavy rains during the period between October, 2019 to January 2020, invasion of desert locusts in over 20 counties and emergence of the coronavirus across the world towards the end of December 2019,” National Treasury Cabinet Secretary Ukur Yatani says in the document ahead of the tabling of the Finance Bill in Parliament today.

The National Assembly’s budget has been revised by Sh4 billion from 39.2 billion to Sh35 billion, while the Judiciary has lost Sh1 billion, from Sh19.2 billion to Sh18 billion. Equally affected will be the Executive, which has lost more than Sh250 billion.

Domestic borrowing

The President’s Big Four Agenda has suffered a huge deduction from Sh232 billion down to Sh126.5 billion.

According to Yatani, the cuts are meant to fill the fiscal deficit inclusive of grants projected at Sh812.5 billion in the 2020/21 financial year.

The financial deficit, Treasury says, will be financed by net domestic borrowing of Sh480 billion, foreign financing of Sh328.8 billion and other domestic financing at Sh3.7 billion.

The outbreak of the Covid-19 pandemic has had a significant negative impact on the Kenyan economy.

This followed the closure of borders by world economies, severely impacting trade, tourism, agriculture, manufacturing and related sectors.

The agriculture sector has further been affected by low global demand for exports especially horticulture, tea and coffee.

“Considering the foregoing developments, the preliminary growth for 2020 is projected to decline to between 2.5 per cent to three per cent depending on the intensity and duration of the pandemic,” reads the report. 

Yatani says that revenue performance for the current year has been impacted negatively by low imports related to taxes.

“Domestic taxes have shrunk due to declining incomes, and depressed consumption as the government implements measures to combat Covid-19, including restricted movement into and out of Nairobi, Mombasa, Kwale, Kilifi and Mandera counties,” says Treasury.

Treasury had projected the country’s economy to grow at 2.5 per cent this financial year, down from a projected 6.3 per cent, due to the coronavirus pandemic.

This will be Kenya’s lowest economic growth since 2008 when the country’s Gross Domestic Product registered a 0.2 per cent rise due to the post-election violence that followed the contested 2007 presidential election.

Postponing projects

Speaking after releasing this year’s Economic Survey in Nairobi yesterday, Yatani said the earlier GDP growth projection was no longer feasible hence Treasury had been forced to revise its revenue projections from Sh1.8 trillion to Sh1.6 trillion.

“We are undertaking a review of all the projections that we had taken to the National Assembly. 

 “Tomorrow we will go to Parliament to present new projections for both economic growth and revenue collections,” said the CS, who indicated that Treasury might not meet its revenue targets due to effects of the pandemic.

“Having seen what we’ve gone through the last few weeks, we are unlikely to realise our revenue targets.

This means we have to look for ways to mitigate reduction including rationalising expenditure and postponing projects,” he added.

Other measures in the revised budget include cuts in domestic travel by state officers by 40 per cent, foreign travels by 25 per cent, hospitality, 30 per cent, research, feasibility studies, 30 per cent, and committee expenses, 30 per cent.

“Treasury expects to realise a Sh5.9 billion saving from the recurrent expenditures,” reads the report.

Of the Sh127.3 billion allocated to the Big Four programmes, food security takes the lion’s share of Sh52 billion followed by universal healthcare at Sh50.2 billion, manufacturing Sh18 billion, and housing Sh6 billion.

“The government will continue with the implementation for the ‘Big Four’ plan to accelerate and sustain inclusive growth, create opportunities for decent jobs, reduce poverty and income inequality and ensure that we create a healthy and food secure society in which Kenyans have access to affordable and decent housing,” says Yatani.

The declaration of a countrywide dusk-to-dawn curfew and restricted movement to key cities such as Nairobi and Mombasa, has dramatically affected small and medium businesses, some of which have been forced to close shop.

The international travel ban has also hit the tourism and hospitality sectors, which are key drivers of the economy with a number of big hotels shutting and airlines grounded.

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