By Winnie Chepkemoi
The theme of the 2017/2018 Budget Policy Statement, as presented in the National Assembly by the Cabinet Secretary in charge of The National Treasury, is “Creating Jobs, Delivering a Better Life for all Kenyans.” Following the address by The National Treasury CS, Mr. Henry K. Rotich on the 2017/2018 national budget, various remarks have been made on just how progressive or retrogressive the Kenyan economy is performing. The interpretation of the above statement is directly dependent on how one was affected; either you were a “winner” or “loser” in the 2017/2018 Budget Policy Statement or on the perception one holds as far as the metrics of ascertaining economic growth are concerned.
An in-depth look at the 2017/18 budget clearly shows that key local and global factors shaped the budget-making process. These factors include:
A deeper analysis of the budget reveals that the government has been pursuing expansionary fiscal policy largely due to:
Overall expenditure in the 2017/18 budget is estimated to have gone up by 5.7% in relative terms, from the initial expenditure estimates of Ksh 2,500.9 billion in 2016/17 to Ksh 2,643.5 billion. To finance this budget, the government anticipates to collect revenue as well as to receive grants totaling to Ksh 1,763 billion, resulting in a deficit of Ksh 880.4 billion. The questions of concern are;
The 2017/18 budget has been termed as a “poor man’s budget.” Is it that the ordinary Kenyans will benefit? If so, is it a long term benefit or a short term benefit considering that 2017 is an electioneering period? This is a fundamental question and concern that the policymakers need to critically think about. Yes, it is a big win to see VAT exemption on maize and wheat flour but we must be honest; even considering other past administrations similar policy measures were enacted but only as short-term safe-landing policy measures. Is the poor man really benefiting in the longer term? Did the government and policymakers have to wait till the election year to realize that we need a comprehensive policy framework to address common needs of the poor man?
There were winners and losers in the 2017/2018 budget. A clear look at this budget reveals the following as the key winners;
The notable loser in the 2017/18 Budget Policy Statement is the betting, gambling and gaming industry. Lately, this has turned out to be a booming sector in which the relevant firms have been paying a flat tax rate of 7%. CS Henry Rotich proposed an increase in the tax rate for the firms in this industry from the current 7% to 50%, a move seen as a regulatory mechanism to make-up for the lack of effective regulatory framework within the industry which is believed to be leading to the loss of moral values among the youth.
The key concern here is if the Sin Tax will be more beneficial or costly in view of the government. Will the move transform the betting and gaming industry? Chances are betting activities may increase in the illegal, informal gambling and betting market segment. The concerned firms will opt to move out of the Kenyan market to other countries because locally the incentives would have diminished. Such a scenario will imply that the government will end up as the loser as the relocation of these firms will significantly reduce the amount of revenue the government collects from taxing the betting and gambling companies.
In conclusion, the 2017/2018 budget highlights various policy issues and policy proposals that are specifically geared towards creating jobs and a better life for all the Kenyan citizens but the policymakers in government ought to focus on the following questions:
The writer is an Associate Partner and a Consultant on Research & Public Policy with Savic Consultants.