Kenya treasury plans to spend $33.3bn in 2021/21

Kenya's Treasury Secretary Uhuru Yitan has recently unveiled a budget of $33.9 billion for the upcoming financial year, sparking a wave of discussion and analysis among economic experts and analysts. In a recent interview on CNBC Africa, Eric Mokaya, the Founder of Mwango Capital, shared his insights on the budget and its implications for the country's economy. The budget, characterized by significant fiscal spending and a projected deficit of around one trillion, has raised concerns about the sustainability of Kenya's borrowing and debt servicing practices. Mokaya expressed his apprehensions about the government's continued reliance on external and internal borrowing to finance the deficit, highlighting the exponential increase in the country's debt over the past few years. With the debt currently standing at around eight trillion, up from 3.6 trillion six years ago, Mokaya emphasized the urgent need for a reassessment of expenditure targets to ensure long-term financial stability. He cautioned against further burdening taxpayers, who are already grappling with the economic impact of the pandemic, with additional taxes. Mokaya also raised alarm over the higher allocation granted to the parliament, suggesting that it could be a strategic move to garner support for critical bills. Despite some positive provisions in the budget, such as measures to strengthen the capital market and promote asset-backed securities, Mokaya underscored the importance of prioritizing COVID-related spending to support economic recovery and prevent future waves of the pandemic. He called for a balanced approach that combines prudent fiscal management with strategic investments in key sectors like infrastructure. The discussion also touched on the challenges faced by the Kenya Revenue Authority in meeting revenue targets, given the prevailing economic conditions and taxpayer fatigue. Mokaya expressed skepticism about the feasibility of implementing additional tax measures, citing previous unpopular proposals and the adverse impact of tax hikes on households. He cautioned against the removal of essential exemptions, emphasizing the need for targeted relief measures to alleviate the tax burden on the population. The interview concluded with a reflection on Kenya's history of revising budgets and the likelihood of supplementary budgets in response to evolving economic dynamics. Mokaya highlighted the importance of monitoring the budget implementation process and addressing any discrepancies or challenges that may arise. As Kenya navigates the complex terrain of fiscal planning and economic recovery, key stakeholders will be closely monitoring the government's budgetary decisions and their impact on the country's financial health.