http://www.businessdailyafrica.com/Somalia+war+leaves+Kenya+with+Sh12bn+Budget+gap+/-/539552/1387784/-/item/2/-/6futil/-/index.html
By GEOFFREY IRUNGU
Posted Monday, April 16 2012 at 20:02
Kenya’s seven-month long incursion in neighbouring Somalia widened the government’s Budget gap by a whopping Sh12 billion, a fresh report on the state of public finances has shown.
Supplementary estimates submitted to Parliament on Monday indicate that the Treasury is seeking an additional Sh12.5 billion “to meet increasing administration and planning expenses of the Kenya Defence Forces”, directly linking the item to the Somalia war.
Also read Kenya increases spending on defence
Military spokesman Bogita Ongeri could not immediately confirm whether the Sh12 billion bill is part of the money Kenya expects to be reimbursed for its war effort in Somalia under a cost-sharing deal agreed with the United Nations early this year.
Kenya invaded Somalia last September after Al-Shabaab militants staged a series of raids inside its territory and abducted more than four foreigners whose freedom they tied to payment of ransoms.
Finance minister Njeru Githae is expected to table the Supplementary Budget Estimates in Parliament this afternoon. Overall, the estimates show a net increase of Sh11 billion in the national Budget.
The mini-budget, whose composition has also been largely influenced by recent strikes by civil servants, includes an additional Sh6.1billion to pay for recently enhanced teachers’ salaries and allowances and another Sh3.9 billion to pay for doctors’ emoluments.
The estimates however show that basic wages for temporary teachers will fall by Sh2.4 billion in the last three months of the current financial year.
Teachers won the expenditure concessions after a vicious battle with the government at the beginning of the third term last year that culminated into a nationwide strike called by Kenya National Union of Teachers (KNUT).
The strike was called to demand employment of 18,000 new teachers and an extra 5,000 this year.
More than 2,300 doctors and dentists went on strike late last year demanding a 300 per cent increment in their pay, which they claimed had not changed for more than a decade.
The action ended with a return to work formula that included gradual increase in the doctors’ salaries and allowances.
The Treasury made the concessions to the striking state employees despite its earlier promise to the International Monetary Fund (IMF) that it would free public wages for three years beginning 2012.
The IMF had in turn agreed to increase Kenya’s borrowing to $760 million from $500 million initially agreed in January 2011.
The supplementary estimates show that apart from the overall increase in expenditure, the Treasury has cut spending in key ministries to keep the budget in check.
Top in the list of ministries whose budgets have been cut is the Treasury itself, whose spending will drop by Sh9.9 billion in the next three months.
The cuts are mainly related to “capital grants to government agencies and other levels of government” as well as “domestic loans to financial institutions.”
The Ministry of Energy’s budget has also been cut by Sh8.6 billion mainly in money that had been earmarked for development.
The increase in government spending comes against a backdrop of increased domestic borrowing that currently stands at Sh3.4 billion above the target for the entire financial year.
Domestic borrowing hit Sh122.92 billion as at the end of last month, which is the third quarter of the financial year than runs from July 1 to June 30.
The Treasury said yesterday it had borrowed more to help state agencies meet their spending in the third quarter when a number of budgeted projects are due for completion.
The excess borrowing also took place against the lower-than-targeted tax and donor receipts.“We have increased those amounts because we want to smoothen out the spending by ministries. There are many projects that are supposed to be completed by the end of the last quarter of the financial year.
Again, we have had lower tax and donor receipts,” said Henry Rotich, deputy director of economic affairs at the Treasury.
The newest figures shows government’s struggle to raise funds has only been fruitful with respect to domestic borrowing.
In terms of tax revenues, the amount collected by end of March stood at Sh453.1 billion by end of March or 66 per cent of the planned amount – even though three-quarters of the year has passed.
Donors were also not forthcoming with their commitments for the financial year having brought Sh18.54 billion by the end of March this year, 38 per cent of the amount targeted during the financial year.
Other revenues, including collections in the form of fees or fines collected by various ministries (also called appropriations-in-aid), was at Sh12.04 billion, well below the year’s target of Sh31.78 billion. That amounts to 38 per cent of the budgeted collections.
The borrowing helped government revenue grow to Sh630.64 billion, 71 per cent of the planned target for the fiscal year.
The other major cause of the increased flow of revenues to the exchequer came from a Sh24 billion in funds surrendered by various ministries which had not utilised them in the financial year 2009/10.
Returns
Since most of the targeted cash had already been raised in loans, analysts said that they did not expect much additional government borrowing during the rest of the financial year.
“The government is in the market for only Sh5 billion more this month, and we don’t expect it to go for much in the next two months,” said Poonam Vora, a research analyst at Dyer and Blair Investment Bank.
She said that the government could, however, take advantage of the interest by the market to raise money cash and then seeks to bridge any financial gap that may arise later with the cash.
“The government will probably not need much money during the rest of the financial year. It will still go to the market because of the need for redemptions and since the markets are liquid fund managers will still be keen to participate as long as there are good returns,” said Ms Vora.
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Received on Tue Apr 17 2012 - 10:25:49 EDT
