This archive report was first published on 9 June 2020.
As the world grapples with the COVID-19 pandemic, Kenya's Treasury is facing skepticism over its Sh2.7 trillion budget for the 2020/2021 financial year. The budget, set to be presented by Cabinet Secretary Ukur Yatani on Thursday, has been criticized for being overly ambitious, given the economic uncertainty caused by the pandemic.
Parliament's Budget and Appropriations Committee (BAC) has expressed concerns over the government's underestimation of the pandemic's impact on Kenyan businesses and incomes. The committee notes that revenue collection is expected to be subdued, with the potential for the revenue projection of Sh1.62 trillion to be overestimated.
According to the committee's report, the government's revenue projection is based on a month-on-month performance of all tax heads, which may not accurately reflect the current economic situation. The committee warns that the situation may be aggravated if the pandemic persists, leading to a potential shortfall in revenue.
Churchill Ogutu, Head of Research at Genghis Capital, shares the committee's concerns, stating that the budget is 'somewhat overambitious.' Ogutu notes that the government's revenue projections are on the higher side, with total revenues estimated at Sh1.9 trillion and ordinary revenue at Sh1.6 trillion.
The Treasury has been forced to revise its estimates since publishing the Budget Policy Statement (BPS). Total revenues were initially estimated at Sh2.1 trillion, revised to Sh2 trillion, and now stand at Sh1.9 trillion.
The Parliamentary Budget Office (PBO) estimates that the disruption caused by the COVID-19 pandemic will cost the government Sh122 billion in revenues. This loss could be plugged by funding received from development partners since the outbreak of the pandemic.
The BAC warns that the Treasury's Sh2.7 trillion budget could rise to Sh3.2 trillion if debt redemptions are factored in. The committee recommends that the government initiate debt restructuring costs to free up money that would have otherwise been used to pay loans redirected to deal with the COVID-19 pandemic.
Despite the concerns, the Teachers Service Commission (TSC) is set to receive the largest share of the national cake, with an allocation of Sh266 billion. Infrastructure is expected to gobble up Sh189.5 billion, while the Ministry of Interior has been allocated Sh131.6 billion.
