Finance CS Yatani tough choices in financing budget
While National Treasury Cabinet Secretary Ukur Yatani put on a brave face as he unveiled a Sh2.8 trillion budget—balancing the tricky matrix of safeguarding lives and engineering an economic recovery—questions abound where the money will come from.
The CS targets to collect Sh1.9 trillion, equivalent to 16.8 per cent of the GDP, similar to the last financial year but all indications are the taxman may miss the target.
As a matter of fact, the Covid-19 pandemic is now becoming an economic hazard, with the cessation of movement destroying the economy’s DNA, millions of jobs having been lost and hundreds of businesses shut down.
Yatani must instil the toughest fiscal discipline, otherwise even the Sh57 billion stimulus package meant to counter the effects of the pandemic will be a farce.
The stimuli package and an earlier attempt to lower the cost of living and that of doing business could be counterproductive.
We get into the financial year 2020/21 with the taxman already having to contend with lower tax rates for corporate and individual incomes, turnover tax, value added tax and provided tax relief to low income earners and employees.
Amid the Covid-19 shock, which is making it impossible for the productive sectors to expand, a runaway public debt which stands at Sh6.2 trillion also stands on the way.
Already, the CS has suggested the government will target more concessional loans that are advanced on terms substantially more generous than market loans.
The other option would be making a raft of measures which would see new taxes sneaked in, a move which threatens to wipe out the much needed stimulus package.
The options will include more austerity measures and putting on hold some of the ambitious projects.
When top taxpayers like the East African Breweries and Safaricom look troubled, the government should consider a moratorium to stay afloat.
Treasury will also have a tough time ahead with the IMF and World Bank, as the international lenders are also bleeding.
Turning to local markets for loans will be an option but this will mean competing with local firms who are looking for finances to revamp their operations.
Whatever his decision, it will be a tough call for Yatani. But, ultimately, he must play hard ball to turn around the economy.