Summary of Kenya Budget 2011-2012 16 Jun 2011
There were immediate reductions in duties of maize, wheat and rice, and the removal of excise duty on kerosene. Diesel duty reductions proposed prior to the budget were also upheld. Enhanced provisions were made to aid rural and urban farming, the latter through the planned piloting of an organic sack gardening program. Whilst some Kshs.10.2Bn has been set aside for the construction of proper irrigation facilities, and water harvesting measures were also introduced.
A 34% increase in funds for infrastructure development was provided for. In addition to roads, provisions were made for railways and energy. Kshs.2.9Bn was allocated to a ‘soon to be working’ and expanded commuter railway in Nairobi. The equally important railway construction linking East African countries, however, suffered setbacks in the previous financial year, and the Minister referred to measures of getting this back on track, particularly bearing in mind the billions being spent on roads.
The budget for the energy sector was doubled, significantly increasing funds for geothermal development. For further advancement of alternative energy, a remission on duty of solar raw materials was announced, making it a more even playing field between domestic solar panel production and imported panels, already enjoying duty free status.
Once again focusing on youth development, the Kenya Youth Empowerment Project was given an additional Kshs 210Mn. The Youth Enterprise Development Fund and the Women’s Enterprise Fund were also boosted. All aimed at creating better and sustainable youth employment.
There were proposed changes to the microfinance industry, with the aim of strengthening regulations of the growing sector. Whilst regulations to accommodate credit information sharing, and proposals for more stringent monitoring of transfer pricing through sharing of information through Tax Information Exchange Agreements with other countries was announced.
Taxes on alcohol and tobacco products were harmonised. Other tax changes were an increase in withholding tax on management, professional and training fees for resident service providers from 5% to 10%. There was no change on PAYE, but filing of tax returns for employees who only have one source of income and pay PAYE has been abolished.
The highly sensitive IDP settlements fund was allocated a further Kshs.4.2Bn on top of the Kshs.9.8Bn already spent, and a clear statement that this was to conclude the resettlement within the financial year.
Significant changes for trading of commercial bonds was announced, allowing for the formation of an Over the Counter (OTC) trading system. Taking secondary trading to smaller investors, and to encourage SME’s to raise funds through bond issues. Banks will also be allowed to trade treasury bonds directly amongst themselves, removing a substantial part of the lucrative business from investment banks & brokers.
The government’s planned expenses for the fiscal year are over the Kshs1.0 (Kshs.1.155Tn) trillion mark, expected revenues amount to Kshs.788Bn, (Kshs.971Bn including loans and grants). The deficit is to be financed by foreign and domestic borrowing.
One hopes that this fiscal year will see allocations properly spent, and not misappropriated such as announced this week by the Ministry of Finance. A Kshs.4.5Bn fraud investigation is underway within the ministry of education. In addition, some Kshs.142.5Bn of allocated funds has been returned to the treasury unspent from last year’s budget.
Kenya’s budget expenditures categorised as recurring and development saw similar apportionments in Tanzania and Uganda (recurring 64 – 65% , development – 35 – 37%), but Rwanda’s apportionment for development was significantly higher at 47% (53% recurring).
Althea McCourt ABIS Limited