Kenya unveils budget to stimulate economic growth

• Source: Xinhua
• [09:07 June 12 2009]
• Comments

Kenya's Finance Minister Uhuru Kenyatta has unveiled this year's budget saying it would stimulate economic growth, cut poverty and protect the poor.

 In his maiden 2009/10 budget delivered in Nairobi on Thursday, Kenyatta proposed a raft of measures that will set Kenya on the path to realizing Vision 2030, the social and economic blueprint aimed at transforming the east African nation into middle-class economy.

 The minister, whose budget formulated on five key themes including stable macroeconomic environment, key infrastructural facility, equitable development, food security and strengthening of governance, said it was meant to enhance food security and spur development.

 He said that the government in conjunction with their Ugandan counterparts had agreed on the need to construct a standard railway line from Mombasa to Kampala beginning in the last quarter of the 2009/10 financial year.

 "This will not only help to reduce the cost of transportation but will also ensure our private sector competitiveness. The rail system will also help reduce the money spent on maintaining the northern corridor," he said, adding that he had allocated 3 billion shillings (38.5 million US dollars) towards this project.

 Kenyatta also put a moratorium on purchase of new motor vehicles, except for security purposes, saying any purchase of new vehicles will be allowed only under very exceptional circumstances.

 "We will also introduce use of fuel cards for the purchase of fuel for government vehicles because we believe this measure will significantly reduce the amount of money the government is spending on fuel," he said.

 The minister also introduced austerity measures to curb government spending and wastage such as directing all cabinet ministers and senior government officials to have one official vehicle whose engine capacity should not exceed 1,800cc.

 "In the face of the difficult economic times we find ourselves today, and responding to the call by Kenyans to contain non- priority expenditures, it is about time we demonstrated in concrete terms that we are a government that listens to its people, " he said.

 Kenyatta reduced ceiling of all ministries in priority expenditure by 80 percent on furniture; 60 percent on advertising and publicity; 40 percent on telephones; 20 percent on hospitality and services; 10 percent on domestic and foreign travel allowance.

 The minister also resisted the urge to raise taxes, saying doing so would have burdened Kenyans further.

 Horticulture exports and dairy farmers will benefit from the zero rating of refrigerated trucks and heat insulated tankers. Motorbike taxi and mobile phones sets will now be affordable after the minister zero-rated bicycles and hand sets.

 The prices of power generators are also expected to come down significantly. Import duty on spare parts, second-hand clothes and jewellery had also been exempted.

 To make cosmetics and beauty, the minister proposed to reduce the excise duty from 10 percent to 7 percent. All these measures, he said would ensure that the products become affordable for the average Kenyan.

 There were also incentives for local companies wishing to list on the Nairobi Stock Exchange after Kenya proposed to reduce the ( listing fees) by 50 percent to 0.15 percent of their capital investments.

 Kenyatta said that his budget would have a 109-billion-shilling (1.4 billion dollars) hole which would be filled through domestic borrowing.

 He pegged development spending at 258.9 billion shillings, a whopping 82.6 percent increase from 141.8 billion shillings the year before. The roads' budget will more than double to 50.5 billion shillings, followed by 30.6 billion shillings for energy, and 24.7 billion shillings on water and irrigation.

 Kenyatta said the budget anticipated 6 billion shillings in privatization proceeds which he expects to be finalized in this financial year. Kenya hopes to raise 569 billion shillings in revenues in 2009/10, or 22.4 percent of GDP, he said.

 "Our utilization of donor funds has been low and this is unacceptable because it delays the development benefits to our people. In a sense, development delayed is development denied and Kenyans cannot afford this especially during these difficult times when it is not easy to obtain additional external financing," he said.

 "In this regard, part of the fiscal space will come from enhanced absorption of external funds from the current rate of about 50 percent to about 80 percent in FY 2009/10. I will establish a Unit at the Treasury to work with line ministries in monitoring project performance in order to unlock the constraints that are responsible for implementation delays."

 The east African nation's growth declined to 1.7 percent in 2008, from 7.1 percent in 2007 due to post-election violence, drought and the global economic crisis but is forecast to grow to between 2.5 percent and 3 percent this year.

 "The outlook for 2009 and 2010 is only slightly better, especially in the face of the ongoing global recession that has reduced demand for our exports, tourism earnings and remittances from Kenyans in the Diaspora. We now project a modest recovery, with the national cake growing by only three percent in 2009," Kenyatta said.