By James Anyanzwa and Njiraini Muchira
Tuesday, April 17, 2012
The war effort in Somalia and impending elections have pushed Government spending to new heights with Finance minister Robinson Githae seeking an additional Sh46 billion over the next two months.
The money will likely come from budget cuts to several ministries as the Government scrambles for cash to support Kenyan troops fighting Al Shabaab militants under the umbrella of the African Mission in
soldier in Somalia at Sh7,000, but the Government believes this is money well spent. It has said the cost of inaction would be higher in the long run, citing the effect of piracy in the Indian Ocean on the price of essential imports.
Its stand has been supported by, among others, the Kenya Association of Manufacturers. This will be the second increase in the budget of the Ministry of State for Defense that runs the war in Somalia, after its allocation was raised by Sh7 billion in the current financial year.
After former Finance minister Uhuru Kenyatta presented a record Sh1.2 trillion budget last June, it emerged that the Government faced a huge deficit of Sh236 billion.
Also eating up a huge chunk of the proposed extra spending is the Independent Electoral Boundaries Commission (IEBC).
Most of the money will finance recurrent rather than development costs in Government and Githae, still fresh in his new docket, faces an uphill task to convince Parliament to sanction his request for more money.
It could yet be his toughest battle before the current financial year ends in June.
According to the Supplementary Budget tabled in Parliament on Monday, the Ministry of State for Defence has been allocated a huge portion of the mini-budget.
The ministry received Sh12.5 billion for salaries and allowances, and to fund military operations against the Al Shabaab extremists in Somalia.
Kenyan troops are sweeping through areas of Southern Somalia controlled by the extremist Islamist group, al Shabaab.
The increased spending also comes at a time when countries in the East Africa region are engaging in an arms race.
So far MPs have made it clear that Treasury has been collecting illegal taxes proposed in the Finance Bill, which MPs have refused to pass until it is amended to cap interest rates.
Besides, Githae is left with only two weeks to present to Parliament the budgetary estimates for the 2012/13 financial year on April 30 in accordance with the Constitution.
In the supplementary estimates tabled on Monday, the minister plans to spend Sh20.5 billion and Sh25.4 billion on development and recurrent expenditure respectively until June 30.
This comes on the back of Sh1.2 trillion budget for the 2011/12 financial touted as one of the biggest in the country’s history.
The IEBC has been allocated Sh4 billion for voter registration as the country gears up for a general election.
The amount is, however, a drop in the ocean as Githae is on record stating that a staggering Sh15 billion would be required to finance the elections. IEBC has already announced the elections will be held on March 4 next year.
The Teachers Service Commission has been allocated Sh6.1 billion for salaries and allowances. Additional funds were also required to cater for payment of new teachers and conversion of teachers on contract to permanent employment.
Money is also needed to cater for contributions to the teachers’ new medical scheme.
Other major beneficiaries include the ministries of Transport (Sh4.9 billion), Medical Services (Sh3.8 billion) and Public Service (Sh1.5 billion).
The Ministry of Foreign Affairs is seeking Sh1.7 billion.
Barely two months at his new portfolio in Treasury, Githae is also likely to present to Parliament a one trillion shillings spending plan for the next financial year, the first under the devolved system of government.
According to preliminary estimates released from Treasury, the total budget for the fiscal year 2012/2013 is projected at Sh1.15 trillion, more or less the same level with the previous two budgets.
An estimated Sh364.8 billion and Sh782.7 billion would be reserved for development and recurrent expenditures respectively
Treasury’s Budget Review and Outlook Paper (BROP) reported that total revenues, including appropriation-in-aid (AIA), would hit Sh922.6 billion, with external grants at Sh47.2 billion.
The overall budget deficit (including grants) in 2012/13 is projected to be about Sh177.7 billion.
Net external financing amounting to Sh.100.1 billion is expected to cover part of this budget deficit, leaving about Sh77.6 billion to be financed through domestic borrowing.
But the Government will not factor in proceeds from the sale of state-owned corporations, whose privatisation has been stalled by the delayed reappointment of some members of the Privatisation Board whose term expired more than a year ago.
The detailed and complete budget for the 2012/2013 fiscal year will be submitted to Parliament by end of this month.
According to BROP, which was tabled by Justus Nyamunga, a director in-charge of Economic Affairs at the Treasury, the Government will continue borrowing from the domestic and external sources (on concessional terms) to finance budgetary deficit.
The 2012 BROP is the first under the current Constitution and succeeds the annual Budget Outlook Papers (BOPA) that was produced under the old constitution.
It provides an overview of the fiscal performance in the preceding financial year, implementation of the current budget and broad fiscal parameters for the 2012/2013 budget and the medium term.
The 2012 BROP covers the medium term expenditure framework (MTEF) period 2012-2013 to 2014/2015, which involves transition to a devolved system of government and implementation of the new constitution.
The BROP sector ceilings incorporate the cost of delivering devolved functions under the new Constitution.
The Government is expected to keep budgetary expenditures consistent with medium term priorities and continue with rationalization to improve efficiency and reduce wastage.