Friday, 14 June 2013

What are the Creative solutions in Kenya's Transformation for Shared Prosperity?

The construction of the Webuye -Malaba highway in  Western Kenya
Transformation for Shared Prosperity was the main theme for the 2013/2014 Kenyan budget estimate as tabled by Henry Rotich, the Kenyan cabinet secretary for the national Treasury with a national optimism that it holds the secret for one moving from poverty, deprivation, low income, low business returns in to wealth, the good life, yes, the shared prosperity now that we are in a devolved system of governance.

The Former Minister for Finance Njeru Githae presented a Budget Estimate for the Financial Year 2012/2013  Kshs.1,459.9) up from Sh.1.15 trillion spent 2010/2011.

His theme was “Deepening our Economic and Social Prosperity within a System of Devolved Government”, thus, to achieve the end he said they were focusing on:

“Strengthening our financial systems by implementing further legislative and institutional reforms  to  keep  the  global  crisis  and  uncertainty  at  bay.  Scaling up infrastructure investments as the building blocks needed to achieve a more lasting and stable  growth;  and  making  growth  and  development  more  inclusive  and  equitable  across  counties  by  investing  in  our  people.”

With that he projected a growth of 5.2 percent for the country in 2012.

Out of his budget, Kshs. 451.7 billion were allocated to development expenditures.

Granted the levels of poverty in Kenya, it is a tragedy that we cannot as a country raise our development budget allocations beyond the 50% threshold. It is in the development budget that project implementation lies that create jobs. Development expenditure boils down to infrastructure development in roads, energy production, rail, ports, and water-works, building institutions and other public facilities that generate significant employment opportunities.

I am not the best economic analyst to go deeper into how the amount was spent, but I can say with that, Kenya’s economy grew by 4.6 percent in 2012 compared to 4.4 percent in 2011, according to this year’s economic survey report released  in May 2013.

Cabinet Secretary for Devolution and Planning Anne Waiguru who presided over the launch says the marginal improvement was driven by notable growth in agriculture, wholesale and retail trade, transport and communication.
The 2013/2014 Kenyan budget was meant to achieve the aspirations and targets of the Jubilee Government. How to finance the 2013/2014 budget is what National Treasure will have to ponder about to actualize the whole thing.

For a start, the government plans to raise Sh1.3 trillion in revenues to fund the 2013/2014 financial year’s budget (increase of 7.5 percent from the 2012/2013  financial year.)

Sh961.3 billion will come from ordinary revenue while Sh67 billion will be expected from donors in form of aid.
Further, deepening tax reforms and enhancing tax administration and further strengthening financial systems for sustainable development.

Is the current budget attainable to in focusing more on the longer term, more sustainable patterns of production and consumption?

Is the budget making government services more effective, while helping to catalyze additional development aid from traditional donors and mobilize private-sector resources?
Tea Estate in Mt Elgon region

The Treasurer aims to achieve this by ensuring there is domestic resource mobilization. Broadening the tax base, and improving tax administration by reviewing the Kenya Revenue Authority organisation. He aims to use this to provide an equitable taxation that would have a positive impact on governance. He also intends to enforce capital gains tax to boost revenue, “to allow wealthier members of our society to also make a token contribution toward our national development agenda”.

Consequently, I have always believed in any budget, the Government needs to make its citizens have money in the pockets at the same time teach them how to have a saving culture, instead, the current norm is encouraging them to obtain loans.

The government needs to keep on promoting financial deepening and inclusiveness that could accelerate private-sector growth, creating more opportunities for the many citizens in the country to access financial services for them to prosper.

Mahmoud Mohieldin the Managing Director at the World Bank Group is of the view that, “A deeper and more efficient financial sector would also reduce transaction costs and facilitate risk management. Local-currency bond markets could help to develop domestic investor bases and mobilize domestic savings to support long-term investments.”

He further notes: finding creative solutions to support prosperity, equality, and sustainability will be key in the development agenda.