Fikira and Maoni on the Kenyan Crisis 18

Here are a few highlights of Mr. Kimunya’s budget highlights 2007/2008 fiscal year. By the way, thanks to the previous arguments, I was forced to look at the budget speech last year and access various analyses of the Kenyan economy.

Some important facts are that:

• The World Bank and other international donors suspended aid to Kenya in 2006 due to corruption related problems.
• The focus of the treasury turned from external financing to effective revenue collection.
• The amounts received from external donors are in the form of appropriation in aid (The money may not be spent for purposes other than that it is appropriated (project specific) for and it must be spent by the end of the fiscal year-(budgeting year) covered by that appropriation or returned to the Fund Source).
• Kimunya's budget was dubbed as the 2030 vision with a high focus on strengthening the agricultural sector.
• The base year of Kimunya’s budgets and reports is the fiscal year 2002/2003

Achievements

• According to Kimunya the country achieved a 6.1% growth rate but other statistics indicate 5%. The difference is nonetheless not very significant economically but materially significant accounts-wise.
• Rise in per capita income from 2.5% to 3.3% in 2006 and overall poverty reduction from 56.8% to 46%.
• Domestic borrowing reduced from 22.9% to 18% which was transferred to the commercial bank sector where lending rates dropped from 19% to 13%.
• Kenya was rated fairly well in the S&P (Standard and poor) index (The S&P 500 is an index containing the stocks of 500 large cap corporations, most of which are American) on issues of credit and governance. An important signal to investors that they could invest there in.
• Poverty and inequality reduction: free primary education, public sector reform, relaxing barriers to trade, giving resources to the constituencies for management.

Failures

• Badly deteriorating infrastructure. Most roads are in a sorry state
  Failing to deliver a new constitution for Kenyans
• Failing to tackle corruption and prosecute those involved in it
• The members of parliament have been earning outrageously big salaries and increasing each time they meet. The treasury was never ever out to advice on this.
• Tackling effectively the insecurity in the country.
• Addressing issues of distributive injustices etc. Some areas languish behind others as a result of poor allocation. Other areas have been ignored by our treasury. The ASAL areas etc.

The Very brief Finance Statement of Kenya

2006/2007 Fiscal Year Revenue and Expenditure

• Total revenue from taxes and net privatizations in 2006 Ksh 376 billion
• Other revenues: Appropriations in aid approximately Ksh 40 billion
• On expenditure (sector allocations too detailed)

2007/2008 Fiscal Year Budget

• Total targeted revenue to be collected Ksh 428.8 billion
• Total anticipated deficit Ksh 109 billion
• The deficit is to be raised as follow (40 billion appropriations in aid, 70 billion domestic borrowing and 36 billion from net privatizations). External borrowing therefore is approximately estimated at 1.9% of GDP, domestic borrowing and net privatizations at 3.4%. At this rate of domestic borrowing the government will release further 14.5% to the domestic financial market paving way for enterprise development.
  Expenditure (see 2007 budget strategy paper) but totaling up to 580.4 billion

My conclusion:

A highly ambitious budget but gives us a picture of what government expenditure is. And a practical way of understanding what portion of our economy’s budget is financed by donors.

From this analysis, you can see that capital expenditure was part of the appropriation in aid funding. I am studying Kimunya’s budget to understand the real budget appropriations in Kenya. If you really have more well detailed Kenya country income and expenditure statement, it would be really interesting.

Somehow with the violence we are experiencing, we have a long way before we reach even the little progress we made this year!