Government had only Sh2.8 billion in its accounts to fight Coronavirus

Treasury CS Ukur Yattani. [Edward Kiplimo/Standard]

The Government had only Sh2.8 billion in its account by end of February, which was too little to help combat the effects of the coronavirus pandemic.

The latest data from the National Treasury shows that nearly every shilling the Kenya Revenue Authority (KRA) collected in taxes has been spent on paying salaries, debts and other recurrent expenditure, leaving the Exchequer with a pittance to spend on a rainy day.

This paints a picture of a country that is living one day at a time, as pressure piles on the State to prepare a stimulus package for struggling businesses.

The Government has also been urged to consider tax relief as the movement of goods and people around the world is curtailed by travel restrictions, lockdowns and quarantines.  

On Friday, the Central Bank of Kenya (CBK) released Sh7.4 billion to support government's efforts to deal with the effects of the pandemic that threatens to wipe out livelihoods and cripple the economy.

"That money goes to help our health facilities and our health workers," said President Uhuru Kenyatta, as he directed National Treasury Cabinet Secretary Ukur Yattani (pictured) to ensure the money is used to support Kenyans to overcome the health crisis.

VAT refunds

The Head of State also pledged that his government will fast-track payment of pending bills and VAT refunds in the next 30 days, which is expected to improve cash flow and keep businesses from sinking.

"Critically, we all recognise that the volume of business has gone down. We need to ensure that we have cash flow to be able to keep ourselves afloat as we go through these trying times,” Uhuru said.

The Sh2.8 billion was less than the Sh5 billion the Treasury had said it would earmark as contingency funds to address any emergencies.

This means the Government has to come up with a mini-budget that will involve slashing of non-essential spending if it is to spend more than Sh3 billion on an emergency such as the current health crisis.

That also explains why the only money that came from the Exchequer’s account was an allocation of Sh1 billion to hire more health workers needed to increase the country's capacity to deal with the pandemic.

Treasury’s Statement of Actual Revenues and Net Exchequer Issues shows that the Exchequer had utilised almost all the Sh1.615 trillion it had mobilised in taxes, loans, grants, fees and fines as at February 28.

In total, the Government spent Sh1.612 trillion with a big chunk of the money going towards recurrent expenditure. This includes salaries, travel, hospitality, advertising, car maintenance, and other administrative expenses.

Almost 40 per cent of the money (Sh666.7 billion) went to recurrent expenditure. Another Sh542.8 billion was used to pay debts, pensions and salaries to constitutional office holders.

Development spending took up Sh220.4 billion while counties received Sh182.3 billion during this period. Salaries, pensions, debt repayments and other recurrent expenditures took a big chunk of the Sh995.3 billion raised in taxes.

With the pandemic ravaging key sectors such as aviation and hospitality, there have been calls for Government to intervene and stop the economy from shutting down.

The drop in the Treasury’s opening balance, from a high of Sh132 billion at the end of August last year, is due to the utilisation of funds raised from the issuing of the third Eurobond.

In January, when the Treasury made its first interest payment for the standard gauge railway of Sh34 billion, the Sovereign Bond 2019 cash reduced from Sh43.4 billion to Sh10.8 billion, an indication that Eurobond dollars might have been used to offset the Chinese loan.