Feature Reflection

Budget for Social Justice!

The Kenyan government has been undertaking budget reforms with a view to improving fiscal policy, planning and budget management functions. Following a 1997 assessment of public expenditure composition and management, the government initiated reforms which included adoption, in 2000/01, of Medium term expenditure Framework (MTEF) approach to budgeting; the establishment of a Budgetary Monitoring Unit; and the introduction of the Integrated Financial Management Information Systems (IFMIS). The adoption of the MTEF approach was intended to achieve four key goals, namely: linking policy making to planning and budgeting; maintaining fiscal discipline; facilitating prioritization of expenditures across policies, programmes and projects; and encouraging efficient use of resources to improve budget outcomes. These reforms have begun bearing fruits in terms of improved expenditures prioritization. However there still remains some challenges in the budget reforms process that, if addressed will result in improved budget outcomes. Full story below...

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Challenges in the Budget

This year’s budget speech, like the previous, laid out clearly the roadmap that the Minister for Finance intends to travel toward economic recovery after the post election violence. The budget speech contained no surprises on the policy and economic fronts as the Minister’s speech followed the script in the Economic Recovery Strategy (ERS). This is good. It means that we can predict government policy and expect it to be sustained over the longer term. A number of clean-up steps that the Minister has taken and industry representations that have been accommodated were impressive. Is the Minister going to be able to balance his books? This is going to depend on a number of things — achievement of revenue targets, containment of government expenditure.

In a tense statement to his colleagues in government and parliament the Minister said that the days of untaxed opulence at the expense of the taxpayer were long gone. Inviting them to participate in the development of their country like other Kenyans the he told his colleagues that all holders of constitutional offices would now be expected to pay taxes like every one else.

 

The Kenyan Budget: A Closer Look

Rita Njau

A budget is a financial plan that outlines the major sources of revenue and how the revenues will be spent in the interest of all citizens. The national budget contains recurrent expenditure, development expenditure and consolidated fund services that target certain constitutional offices. The government generates funds from taxation, internal and external borrowing and sale of public assets.

The 2008 Budget was well received by some sections of the public: those who are considering investing in business were happy to read that business licenses would be reduced; farmers were happy to read about the reduced prize of fertilisers; housewives were glad with the zero rating of some basic food stuffs; as were manufactures using plastic papers for packaging goods and gender activists who lauded the move for women to make separate tax returns thereby reducing the amplification of pre-existing gender in-equalities through discriminative practices, among others.

A closer look at the positives that Hon. Kimunya laid out, however begs certain concerns. When considering zero rating of food items, the government needs to appreciate that it cannot put much reliance on VAT as a source of income. As such, zero rating of food stuffs should be increased to more food items such as milk powder, dried beans, vegetables and fruits. This will ensure that the target beneficiaries merit a balanced diet as opposed to the zero rating on maize flour, wheat and rice. Some proteins, minerals and vitamin produce will help keep nutrition related health concerns at bay.

The sin tax or exercise tax on alcohol and cigarettes was lauded by those who do not partake of the items as they felt that the Minister was right in placing the measure to serve as a deterrent. However, exercise taxes are progressive if they are levied on goods that are consumed by rich households (e.g. expensive cars). When levied on goods consumed by both rich and poor households, as is the case of ale based beer and cigarettes, the tax becomes regressive. This tax will in effect affect the kitchen budget of poor families: those drinking and smoking will rarely cut on their perceived leisure needs, but will rather reduce the amount of meat and fruits purchased for their households.

The proposal for a housing construction policy to increase the number of low cost housing units to 200,000 is a plus. However, even with the proposed 150,000/= Ksh tax relief pa annum on mortgage, it is rather obvious that many of the poor will not access this facility. The average income of a Kibera slum dweller is 12,011 per month1. NIC the lead partner for this activity will not be able to consider persons with such low income, unless there is a paradigm shift in the banking practice in Kenya. The above not withstanding, could the line ministry consider development of a programme to assist in house construction for poor people in which priority is given to widows? Could the government reserve between 0.5 and 0.75% of their housing budget as a contingency fund to meet emergency housing needs especially for those in extreme conditions of poverty and homelessness more so in post election conflict Kenya?

The Honourable Minster proposed to allocate an ‘additional Ksh. 500 million for the installation of physical and social infrastructure in slums in 20 urban areas’. In order to arrest a policy implementation hitch over legal technicalities, the Ministry of lands and/or commissioner of Lands need to provide security of tenure to slum dwellers to allow for the official recognition of these areas. Failure to do so will condemn the good intentions of Hon. Kimunya to remain on the budget speech never to see the light of day. Closely related to this is the Ministry of education expenditure: the amount allocated to enhance universal primary education and expand recruitment into secondary education is a step in the right direction. However, what can be said of the child in the slums? These schools do not receive government funding because they are sponsored by development partners and/or faith based organisations as the government abdicates its duty in the name of slum areas such as Kibera not existing in the official city council maps! Schools in slums could do with adoption of temporary special measures to accelerate the achievement of substantive access of education for school going children in the slums as well as enhance impact outreach of the proposed education expenditure. However, the budget was a great improvement in terms of identifying with the poor and marginalised as compared to those of yesteryears.

Rita Njau is the Advocacy Officer and Programme coordinator at Jesuit Hakimani Centre, Nairobi

1 BNB 2007 Annual Survey, Pauline’s Publications, 2008.

 

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