The 129-page budget proposal for the 2023/44 financial year did not deviate significantly from previous budgets.
That was not surprising; governments are not famous for shocks and revolutions. They are better known for incrementalism and evolution.
Hooked on the housing levy debate, we can easily miss other details. Most of the budget contents were already in the public domain. Recall when the budget content was secret till the budget day?
Treasury Cabinet Secretary Prof Njuguna Ndung'u started by acknowledging the critical issues raised by the public - the high cost of living, the high level of unemployment among the youth, the high tax burden, the wastage of public resources and the high public debt burden. Throughout the budget, there were echoes of the Kenya Kwanza (KK) manifesto. KK can now set itself free from the Uhuru administration budget, which it had cited as a constraint to its economic agenda.
Bringing those issues early portrayed the government as sensitive and a listener. Prof Ndung'u then went on to demonstrate how in nine months the government has tried to address the key issues through subsidies, food imports, improved liquefied petroleum gas (LPG) supply, health insurance, the Hustlers Fund, competency-based curriculum (CBC), the new university funding model, digitisation of State services, police independence, the appointment of more judges and the oil import deal that is expected to reduce the demand for dollars.
The new mantra is bottom-up economic transformation (BETA), which is built on Vision 2030 and sustainable development goals (SGDs). Is this something akin to Jubilee's administration's Big Four agenda? Now KK has the Big Five. Agricultural Transformation; Micro, Small and Medium Enterprise Economy; Housing and Settlement; Healthcare; and Digital Superhighway and Creative Industry.
The interventions in the aforesaid sectors aim at reducing the cost of living, creating jobs, achieving more equitable distribution of income, enhancing social security, expanding the tax base for more revenues to finance development and increasing foreign exchange earnings.
The CS made it clear that BETA will be implemented through value chains.
External forces have been blamed for our current economic circumstances. What of internal forces?
Any surprises? They were few, the most notable being why is a "religious government" chose to be mute on the sin tax.
Prof Ndung'u also acknowledged the role of the International Monetary Fund (IMF) and the World Bank.
Beyond providing money, their invisible hand could be forcing a reduction in fiscal deficit from the current 5.8 per cent of GDP to 3.6 per cent by the 2025/2026 financial year.
Other issues addressed in the budget include easing pressure on the shilling through the new government-to-government petroleum importation model. Add Climate Change Mitigation and Adaptation with zero emission by 2050, e-procurement, reforming Kenya Power and Kenya Airways; pending bills; and Central Bank-led financial reforms, including digital lending and customer data protection.
There are also proposed reforms in capital markets and real estate.
Increasing pension coverage from the current 22 per cent is in order. What is the target percentage?
Other reforms target insurance, Saccos, unclaimed assets, ease of doing business and protecting consumers by enhancing competition.
Budget deficit
To fund all these reforms, the government expects to collect Sh2.96 trillion or 18.2 per cent of GDP.
Expenditure is Sh3.7 trillion (22.6 per cent of GDP). A budget deficit is envisaged and expected to reduce gradually reaching 3.6 per cent of GDP in the 2025/26 financial year.
Is this through more taxes or less wastage? There was an assurance that public debt is sustainable, despite hits from currency depreciation and the redemption of the Eurobond next year. The role of PPP and the proposed Public Investment Management Information System (PIMIS) are explained. Is that another way to reduce the deficit?
The money is then allocated as per the five priority areas outlined earlier to ministries, counties, the Constituencies Development Fund (CDF), the Judiciary and Parliament.
Counties will get more functions and are expected to raise more revenues, more so through new valuation rolls. Expect rates to go up.
Tax measures include raising petroleum VAT to 16 per cent and exempting aircraft parts and exportable services. Others are zero-rating LPG, international freight and machines for manufacturing pharmaceuticals, specialised hospital equipment, tourism facilities and recycling plants
VAT is also removed from transfer of going concerns to encourage mergers and acquisitions.
Duty is imposed on imported fish, juice, betting and imported sugar. Annual inflation adjustment on taxes has been removed.
This is as the government adds duty to adverts for alcohol, betting, gaming, and lottery. Duty on the Internet, data and money transfer services, on the other hand, have been reduced.
Treasury has imposed duty on imported cement, paints and furniture to protect local industry.
Other interesting observations include a reduction in the rent tax rate to 7.5 per cent. You can also defer tax on gains for five years for shares to encourage start-ups.
There is a bold attempt to encourage post-retirement medical schemes with tax reliefs and tax exemptions on their investment.
Prof Ndung'u also proposed a digital tax of three per cent and a withholding tax of five per cent for digital content creators.
This is as high tax bands for high earners rises to 35 per cent. More use of technology in tax and an amnesty to are mentioned.
The Tax Procedures Act is to be amended to allow taxpayers who overpay taxes to utilise overpaid tax to offset both outstanding tax debts and future tax liabilities. How about reducing the tax refund period to 24 hours instead of six months, just like paying some taxes?
There are more goodies for Export Processing Zones (EPZs). The housing levy was mentioned at the end when listeners were tired and yawning.
The budget has something for everyone. Pick what matters to you. The test of the pudding is in the eating. The government has a year to implement the budget. How many supplementary budgets shall we have?
To the ordinary Kenyans (the hustlers), it's about the reality - the school fees, the price of unga, rent and the money in the pocket.
They hope the money allocated to various ministries or departments will trickle down to their pockets through demand for their goods and services.
Hopefully, the subdued economic spirit as the budget was being read will soon translate into economic optimism.
