Cabinet approves Sh350b increase in budget to appease workers

Higher salaries for public servants will break the bank for taxpayers as Government blows next year's budget spending by Sh350 billion.

Only Sh100 billion is however expressly directed at raising wages, while planned expenditure of the balance of Sh250 billion remains unclear. The Cabinet yesterday approved the increase which takes the national budget to Sh2.6 trillion shillings - most of which will be financed by higher taxes and more loans.

Increased taxes are however unlikely considering Kenya is heading to an election year, leaving borrowing as the more realistic option to plugging the hefty spending plan shortfall.

"Cabinet noted that the budget has increased from Sh2.48 trillion in 2016-17 Budget to Sh2.62 trillion," a statement issued by State House Spokesperson and Head of the Presidential Strategic Communication Unit, Manoah Esipisu partly read.

But the figure listed by State House was contradicting given that the current budget had even been cut down to Sh2 trillion and not Sh2.48 trillion as suggested. However, if the State House figure is correct, then it means that Kenyans should expect a larger mini-budget that may be in the offing before closure of the financial year on June 31.

The National Treasury had earlier estimated that Kenya would spend Sh2.275 trillion in the next financial year that would be financed by Sh1.69 trillion tax revenue.

BUDGET DEFICIT

The Cabinet, according to the State House statement, was confident that Kenyans can raise Sh1.7 trillion in taxes next year, which will put the budget deficit at Sh900 billion. Economists were immediately alarmed by the size of the budget deficit in the upcoming budget, which is nearly double the Sh522 billion estimated for the current financial year.

"It is almost a trillion!" Kwame Owino, the chief executive of the Institute of Economic Affair said of the expected financing shortfall in the 2017-18 budget.

"This is almost equivalent to 190 days of KRA's collections: That is a half year's collection."

Mr Esipisu said part of the increased spending will go into paying perks for civil servants which will take up Sh100 billion. No information was immediately available for where the rest of the Sh250 billion will be spent, while efforts seeking clarification from the National Treasury and State House were futile.

"The proposed FY 2017-18 budget estimates provides adjustments to provide room for allocation of Sh100 billion for salary increases for all public servants starting July 2017," the State House spokesman said.