Yatani put on the spot over budget funding

Thursday, June 3rd, 2021 00:00 |
Treasury Cabinet secretary Ukur Yattani. Photo/File

Mercy Mwai @wangumarci

The Parliamentary Budget Office (PBO) has warned that the National Treasury will find it difficult to fund the 2021/22 Budget set to be released next week due to under-collection of tax revenues and lack of policy direction.

The BPO, which is an independent arm of the Legislature, accused Treasury of “consistently” setting “overambitious” revenue targets during the budget making process, which they have not been able to achieve.

In particular, the office accused Treasury of giving the Big Four Agenda a wide berth, raising concerns whether President Uhuru Kenyatta will be able to achieve his legacy projects.

“The National Treasury projects a total revenue collection of Sh2.04 billion – 16.4 per cent of Gross Domestic product (GDP) – in 2021/22 of which, ordinary revenue will be Sh1.776 billion (14.3 per cent of GDP).

The targeted collection from income tax, which accounts for about 50 per cent of tax revenue, is Sh835 billion.

The other main sources of ordinary revenue will be Sh473 billion from VAT, Sh241 billion from Excise Duty and Sh119 billion from import duty,” reads a report by the PBO.

Dwindling income

According to the office, since the 2013/14 financial year, ordinary revenue as a share of GDP declined from 18 per cent to about 15.5 per cent in 2019/20 due to dwindling income tax and VAT collection, a clear indication that it would be difficult for the National Treasury to meet its target.

The office also raised concern that while the actual tax revenue collection in 2019/20 was Sh1.5 trillion, in the printed estimates the target was Sh1.75 trillion, which is a 21 per cent shortfall in tax revenue during the 2019/20 financial year.

“It is evident that the National Treasury needs to move away from the usual revenue collection enhancement measures which have proved to be ineffective in increasing revenue as a share of GDP over the last couple of years,” reads the report.

It also says that while the 2021/22 budget speaks to the post-Covid-19 Economic Recovery Strategy  and the ‘Big Four’ agenda, these have not been given much prominence in the Budget in terms of key projects that are expected to turn around the economy given the prevailing situation.

There is also no clear theme that has been identified as a general guide to budgetary allocations as resources appear to have simply followed previous trends with bulk funding being allocated to education and infrastructure sectors, as has often been the case.

Much prominence

“2021/22 is the last full financial year for implementation of the Big Four and it has become apparent that many of the Big Four targets may not be achieved by 2022.

It is observed, however, that the Big Four agenda does not appear to have much prominence in the budget,” adds the report.

On projects to be implemented in the coming financial year, the list of activities provided does not include status of ongoing ones, thereby making it difficult to monitor them, adding that some projects had become “permanent” in the budget.

“There is no roadmap on how to deal with the huge stock of incomplete or stalled projects in the Budget including which ones will be prioritised and which ones are not economically viable.

Even though this is a long-term target, the strategies should be put in place early in order to minimise wastage on low projects,” reads the report. 

On sector funding, the office has raised concerns that with regards to the infrastructure, energy and ICT sectors allocated Sh332.86 billion; the National Treasury will become an implementing agency for projects such as the Dongo-Kundu Special Economic Zone, SGR Nairobi-Naivasha, Mombasa Port Development Project, LAPSSET project and Kenya Mortgage Refinance Company, which raises concerns about conflict of interest.

In the health sector, which has been allocated Sh121.09 billion, the BPO has raised concerns that over-reliance on donors is to blame for the inadequate allocation towards Covid-19 vaccination.

Significant portion

Although the education sector has been allocated Sh509.2 billion, which accounts for a significant portion of the Budget, funding gaps still exist such as the underfunding of the free-day secondary school programme and Technical and Vocational Education and Training Authority.

In the Agriculture, Water and Environment sectors, allocated Sh173.21 billion, the office regrets that it is one of the least funded sectors in the Budget and is prone to cuts during supplementary budgets, thus leading to stalled projects and pending bills despite the sectors being central to achievement of food security.

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