NAIROBI, Kenya, Apr 12 – Kenya’s economy is headed for a tougher run due to a growing burden of debt servicing, the government’s inability to implement austerity measures, and a worsening global economic slowdown.
This is according to projections by the Institute of Public Finance (IPF), which noted that the government’s decision to reduce budget allocations to high-impact sectors like Agriculture and Social Protection that have the potential to support inclusive growth.
The Nairobi-based public finance analysis think tank maintains that these sectors are essential to promoting economic growth and eliminating poverty and therefore reduced financing for these areas could have a negative impact on the population’s general welfare.
The National Treasury proposes a 12 per cent and a 0.3 per cent reduction in allocation for the Agriculture, Rural and Urban Development (ARUD) and Social Protection, Culture & Recreation (SPCR) sectors respectively in the Financial Year 2023/2024 Budget estimates, compared to the Financial Year 2022/23 Supplementary I Budget allocations.
Speaking during the launch of the Financial Year 2023/2024 Annual National Shadow Budget, IPF CEO, James Muraguri pointed out that it is concerning that the budgetary allocation to the priority regions does not meet the government’s pledges.
“There seems to be a significant misalignment or less prioritization of critical sectors of high impact. The agriculture sector, which employs more than 40 percent of the total population and 70 percent of the rural population, does not seem to receive the attention that it deserves. This has a net effect of leading to food insecurity where it is estimated that by June 2023, 5.4 million Kenyans are projected to face elevated levels of acute food insecurity,” said Muraguri.
The government intends to spend Sh3.6 trillion in accordance with the Financial Year 2023/24 budget ceilings.
Environmental protection, water and natural resources are among the top five gainers for the Financial Year 2023–2024, followed by health 36 per cent, national security 26 per cent, energy, infrastructure, and information communications technology 22 per cent, general economics and commercial affairs 14 per cent and national security 51 per cent.
Although the funding for the health sector has increased, the Abuja Declaration’s need for a 15 percent budget share for health is still not met.
The government’s dedication to its goals for Universal Health Coverage is called into question if it fails to reach such a threshold.
IPF adds that there are functions that cross over and overlap in different government sub-sectors.
For instance, the State Department’s mission for the EAC overlaps with that of the State Department for Trade and the State Department for Foreign Affairs despite the EAC’s budget being 100 per cent recurring.
The same interventions are also directed at MSMEs, young people and women in the General Economic & Commercial Affairs (GECA) and Social Protection, Culture & Recreation (SPCR) sectors.
“To cure this, we call for the full implementation of the report by the Presidential Task Force on Parastatal Reforms 2013, which proposed the collapsing of the Youth Enterprise Development Fund (YEDF), Women Enterprise Fund (WEF) and UWEZO Fund into Biashara Fund to consolidate the synergies between the respective agencies in support of the MSMEs sector. Instead, additional funding like Credit Guarantee Scheme and the Hustler Fund got introduced,” said Muraguri.
Muraguri warns against providing more financing to government agencies with low development budget absorption rates since it could result in the spending of taxpayer money on non-essential services.
In order to reach its revenue collection targets, IPF said the government must put in place the proper mechanisms to streamline operations at the Kenya Revenue Authority (KRA).
The Chief Administrative Secretary (CAS) in the Office of the Prime Cabinet Secretary Isaac Mwaura noted with concern the increased appetite for increased budgetary allocations to sectors that do not have a direct impact to the common Mwananchi.
“We need to consider budget consolidation and a tighter fiscal management structure to ensure that we resolve the current constraints for more sustainable and inclusive economic growth.”
“Governments exist to resolve the problems affecting the citizens and lift them from poverty. However, with elements such as debt driven developments, it becomes difficult to achieve this mandate,” said Mwaura.
