Category Archives: Kenya budget deficit

Borrowed Budget? Thoughts on 2014/2015 Kenya National Budget

Thursday was one of the busiest days in any Business Journalist’s calendar.

However Budget day, 2014, in today’s form is no longer the secret it always was under the old constitution.

By April the estimates are out, and most accounting/audit firms and economists begin to do their analyses of how Government will spend it’s monies.

For a government that has been criticised to live above its means, we were keen to find out how the Cabinet Secretary, Henry Rotich was planning to raise the 1.8 trillion shilling 2014/2015 budget.

Most economists agree however that we as a country are still within manageable debt levels as far as international standards are able to go by, therefore the question of whether we will borrow the money and the impact of this did not feature as much of a question.

These were the key issues I wanted to centre on:

1. Is this a growth focused budget?
2. Is the budget deficit a real problem, REALLY ?
3. Are we convinced that treasury will achieve it’s targets?
4. Has the CS convinced us enough in how he plans to fund the budget?
5. How safe will the CS play in reflection of the current national emotions?
6. Is Jubilee working towards delivering it’s election promises?

Henry Rotich played it safe. Extremely safe if you asked me.

Common consensus was that it was a Mwananchi budget,but my question was

“Was it a Mwananchi budget or a budget from a government that was too AFRAID to squeeze it’s citizens even more?”

There was a sigh of relied when there was no mention of new sin taxes, which is usually the first culprit. However multinationals will now take a chunk of the heavy lifting with tightening around multinational transfer pricing.

(Definition of ‘Sin Tax’
A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. These type of taxes are levied by governments to discourage individuals from partaking in such activities without making the use of the products illegal. These taxes also provide a source of government revenue. – Investopedia.)

The winner, everyone agreed was the manufacturing sector. Later that evening I hosted the Cabinet Secretary Adan Mohammed at the Business centre and asked him these questions:

1. Industry has the capacity of creating millions of Jobs, apart from the industrial parks mentioned in the budget statement, there wasn’t much else in regards of creating growth opportunities in the sector
2. How do you suppose these industrial parks will work and what should Kenyans expect?
3. High costs of energy remains a key challenge to manufactuers, In his state of the Nation address the president talked about adding 500MW to the National grid, today there was mention of geothermal allocations, when can we begin to feel the impact of investments in energy?
4. An estimated 15 million Kenyans are today unemployed a large number of them are young people, what can we expect from your Ministry this fiscal year to play your role in creating opportunities for young people?
5. Customs bonds on Industrial sugars and wheat have now been removed, what exactly does this mean and should local players worry about that?
6. Imported steel products will now be taxed import duty raised to 25% as a means to protect our local steel factories, what is the immediate impact of this?


( I will post the interview herein)

This time round, I thought that the Capital Gains tax would be introduced. Kimunya tried. Githae tried.Let’s just we cannot attempt to tax the wealthy and get away with it. Dead and buried for now.

Here’s a look at the definition of Capital gains tax;

A type of tax levied on capital gains incurred by individuals and corporations. Capital gains are the profits that an investor realizes when he or she sells the capital asset for a price that is higher than the purchase price. (Think stocks, for instance)

There was also no mention of VAT or any new taxes introduced despite a general argument that it would be the easiest way to plug the budget deficit.

My analysts in studio agreed it was a budget with little excitement, nothing daring or innovative therein.

Going forward, analysts argue that innovation in taxation is badly needed, and that the tax base can be so much further widened without necessarily squeezing Kenyans even further.

As you chew sugar cane over the ‘Mwananchi Budget’ remember the CS spoke of reviewing the Tax Regime. So, it’s perhaps all about timing.

Watch out for these going forward:

Excise Duty Bill
Review of Income tax act

Highly likely that these will be an avenue to sneak in new taxes. maybe, maybe not. You know what they say about predictions!