By CPA Peter Kibet Kitur
This document provides an overview of key information relating to the economic outlook, government revenue and expenditure, Kenya’s stimulus economic program, the big four agenda and its allocation, public debt management and aspects of taxation.
The International Monetary Fund’s (IMF) January 2022 World Economic Outlook Update, states that the global economy is expected to decelerate to a growth of 4.4% in 2022, down from a growth of 5.5% in 2021. Conversely, the Economist Intelligence Unit projects a reduction in the global GDP growth to 3.5% with respect to the calendar year 2022. This deceleration is due to a number of global uncertainties which ultimately impact the Kenyan economy; such as Geopolitical instability (Russia- Ukraine conflict, a possibility of new COVID-19 variants and climate change concerns as well as persistent drought among others. Kenya’s economy was estimated to have recovered strongly in 2021 as economic activities continue to pick up on the strength of the easing of COVID-19 restrictions and stimulus interventions by the Government. The economy is estimated to have recovered and grew by 7.6 percent in 2021 from a contraction of 0.3 percent in 2020 with a projection of 6.0% in the year 2022.
KENYA’S STIMULUS ECONOMIC PROGRAM
In the budget the government has captured the third phase of the stimulus economic program. The program came into effect to mitigate the negative effects of the COVID-19 pandemic in 2020 through programs such as;
- Improved education outcomes by construction of additional classrooms in primary and
secondary schools, - Recruitment of 1,000 contract teachers and 1,000 ICT interns to support digital
learning in public schools, - Enhanced liquidity to businesses through provision of seed capital
- To operationalize the Credit Guarantee Scheme in order to support SMES access credit and fast tracking payment of VAT tax refunds and pending bills.
- To improve health outcomes by recruitment of health staff
as interns, - Infrastructure development by rehabilitating access roads and footbridges to optimize the use of local labour and materials, thereby generating jobs for the youth under the “Kazi Mtaani” Program
- Boost tourism by supporting hotel renovations through soft loans channeled through the Tourism Finance Corporation
- Supporting Kenya Wildlife Services to engage community scouts.
Kenya is entering into an election season culminating in the August 2022. This is likely to have an effect on the economic activities and vibrancy. Election seasons in Kenya over the past periods have created uncertainties resulting in slump economic activities and investments as investors especially foreign investors relax their investments. As per past realities and data, election years tend to witness reduced growth in GDP as compared to non-election years.
The Third phase – Economic Stimulus Program is designed to accelerate the pace of economic growth. In this phase, the Government is allocating additional resources to implement strategic interventions in key product and service sectors in thirteen strategic interventions that cover: agriculture, health, education, drought response, policy, infrastructure, financial inclusion, energy and environmental conservation.
| Ksh 2.1 billion | Under the Kazi Mtaani programme | |
| Ksh 4.0 billion | Construction of classrooms to support CBC |
2022 GENERAL ELECTIONS Kenya is entering into an election season culminating in the August 2022. This is likely to have an effect on the economic activities and vibrancy. Election seasons in Kenya over the past periods have created uncertainties resulting in slump economic activities and investments as investors especially foreign investors relax their investments. As per past realities and data, election years tend to witness reduced growth in GDP as compared to non-election years. |
| Ksh 2.75 billion | Improve Infrastructure for Primary and Secondary schools | |
| Ksh 1.5 billion | Recruitment of contract teachers and ICT interns | THE 2022/2023 BUDGET SUMMARY Total government expenditure and net lending comes Kshs. 3.3428 Trillion. Of this, Ministerial recurrent expenditure Kshs. 1,387.9 billion Ministerial development expenditure Kshs 711.5 billion Interest payment and pension Kshs.869.3 billion Contingency fund Kshs. 4.0 billion Equitable Share to counties Kshs. 370 billion. Total Revenue of Kshs.2.447 Trillion, Grants expected totals Kshs 33.3billion Deficit comes to Kshs. 862.5 Billion Net foreign financing comes to Kshs280.7 billion, Net domestic financing comes to Kshs. 581.7 billion |
| Ksh 1.35 billion | Recruitment of additional diploma and certificate level Health interns | BIG FOUR AGENDA The Kenya government continues to emphasize the importance of the Big 4 Agenda. The realization of programs under the “Big Four” Agenda is a critical path to supporting sustainable economic recovery, accelerating employment creation, supporting manufacturing activities, enhancing health coverage, improving food & nutrition |
| Ksh 5.8 billion | Improving environment, water and sanitation facilities |
This can be evidenced by the following allocations as per the 2022/2023 budget; |
| Ksh 1.5 billion | Subsidize supply of farm inputs through E-voucher system | (i) Universal Health Care The Government is making strides towards attainment of Universal Health Coverage (UHC) and strengthened the health care system to respond to pandemics and other global health security challenges. |
| Ksh 1.0 billion | Credit Guarantee Scheme | In the FY 2022/23 Ksh 62.3 billion has been allocated to universal health care. Some of the allocations are as follows: |
| Ksh 604 million | Credit to SMEs in the manufacturing sector (KIE) |
Kshs.5.2 billion for Free Maternity Health Care Kshs. 4.1 billion for Medical cover for the elderly and severely disabled in our society |
Kshs. 1.9 billion to Roll out of Universal Health Coverage
Kshs. 18.1 billion to Kenyatta National Hospital
Kshs. 11.7 billion to Moi Referral and Teaching Hospital
Kshs. 7.7 Billion to Kenya Medical Training Centre
Kshs 5.2 billion to Universal Health Coverage Coordination and Management Unit
Kshs. 1.2 billion for Vaccines and Immunizations
(ii) Manufacturing
In the FY 2022/23, Ksh 10.1 billion has been set aside to promote local industries under various Ministries, Departments and Agencies so as to create a conducive business environment for industrial growth, creation of jobs and improved livelihoods.
Some of the specific allocations are as follows:
Ksh 2.6 billion Development of a Freeport and Industrial parks-SEZ Mombasa
Ksh 1.0 billion Credit Guarantee Scheme
Ksh 3.0 billion Supporting Access to Finance and Enterprise Recovery (SAFER)
Ksh 1.3 billion Kenya Industry and Entrepreneurship project
Ksh 626.0 million Provision of finances to SMEs in manufacturing sector KIE
Ksh 200.0 million Constituency Industrial Development Centre
Ksh 85.0 million Development of SEZ Textile Park in Naivasha
Ksh 142.8 million Cotton development (RIVATEX)-subsidy and extension support
Ksh 410.4 million Modernization of RIVATEX
(iii) Housing agenda
The Government has focused on raising low-cost funds from public and private sectors for investment in large-scale housing under the Affordable Housing Scheme through the National Housing Development Fund and the various public-private partnerships.
In FY 2022/23 budget, Ksh 27.7 billion has been allocated for affordable Housing
Some of the allocations are as follows:
Ksh 4,6 billion Operationalization of Kenya Mortgage and Refinance Company (KMRC);
Ksh 7.7 billion Kenya Affordable Housing Project (Kenya Mortgage Refinance Company) ;
Ksh 1.0 billion Construction of affordable Housing Units;
Ksh 5.9 billion Kenya Informal Settlement Improvement Project – Phase II;
Ksh 1.05 billion Housing Units for National Police and Kenya Prisons;
Ksh 2.3 billion Kenyan Urban programme (KenUP).
Ksh 1.2 billion Construction of Social Housing units
(iv) Food security
Food security will be achieved through large scale production of staple food, expansion of irrigation schemes, increased access to agricultural inputs and implementation of programs to support smallholder farmers to sustainably produce and market various commodities.
In FY 2022/23 budget, Ksh 46.8 billion has been allocated. Key allocations in this budget include:
Ksh 4.2 billion National Agricultural and Rural Inclusivity project
Ksh 1.5 billion Small Scale Irrigation and Value Addition Project;
Ksh 1.7 billion Kenya Cereal Enhancement Programme
Ksh 1.9 billion Emergency Locusts Response
Ksh 1.6 billion National Value Chain Support Project;
PUBLIC DEBT MANAGEMENT
There has been some financial stress by the Kenya Government stemming from record-high debt levels and overall growth in public expenditure. According to the National Treasury and Planning’s Annual Public Debt Report for FY 20/21, approximately 53.8% of ordinary revenues would be allocated to servicing public debt in FY 22/23. According to the Parliamentary Budget Offices’ FY22/23 report, total expenditure is projected to increase by 9.2 percent from the last year. A significant proportion of this increase is driven by interest payments on public debt which accounts for 30% of ordinary revenue in FY22/23.
ASPECTS OF TAXATION
To help the government obtain the expected revenues, the following measures and changes have been proposed in the Finance bill and relevant tax policies and laws:
- Increase of excise duty on certain products The CS has proposed to increase excise duty on certain products with specific rates by 10%
- Tax Administration Taxpayers to deposit 50% of the disputed tax prior to
appealing a TAT decision
The Tax Appeals Tribunal Act, 2013 is to be amended to require a taxpayer who is aggrieved by the decision of the Tax Appeals Tribunal, to deposit 50% of the disputed tax revenue in a special account at the Central Bank of Kenya (CBK) as the taxpayer proceeds to appeal the decision in the High Court. The main reason behind this is for the government to protect disputed revenues since most disputed cases take long to be resolved.
