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Inside Kenya’s Sh 3.02 trillion 2019/ 20 budget

There is an estimated deficit of Sh 607.8 billion, an increase from Sh 562 billion this financial year

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Kenya's Cabinet Secretary for National Treasury Henry Rotich leaves with the budget briefcase for Parliament to read

Kenya’s 2019/20 budget will be the seventh under the country’s jubilee administration. Its National government plans to spend Sh 3.02 trillion, about 10 billion higher than the current (2018/19) budget.

There is an estimated deficit of Sh 607.8 billion, an increase from Sh 562 billion this financial year. The government is likely to borrow more in the next fiscal year to bridge the deficit as Kenya Revenue Authority (KRA) is expected to miss this year’s revenue collection target by Sh 118 billion.

Kenya's Cabinet Secretary for National Treasury Henry Rotich (C) poses with the budget briefcase before leaving for Parliament
Kenya’s Cabinet Secretary for National Treasury Henry Rotich (C) poses with the budget briefcase before leaving for Parliament to read the budget speech for 2018-2019 in Nairobi, Kenya, on June 14, 2018. (Photo by Yasuyoshi CHIBA / AFP)

Related: Kenya’s Safaricom, Equity bank seal digital banking partnership

Treasury Cabinet Secretary, Henry Rotich, has set a revenue target of Sh 2.2 trillion while KRA is expected to collect approximately Sh 1.9 trillion. Experts say the government might also heighten the tax regime to fill this budget deficit.

In the 2018/2019 financial year, the government was forced to introduce stringent tax measures to raise funds to support the budget.

This year, the government will likely raise Value Added Tax (VAT) from the current 16 per cent and Capital Gains Tax, which targets the wealthy. The betting industry will also be targeted.

Raising the VAT will contribute to a high cost of living as prices of basic goods such as food will go up. According to the Central Bank of Kenya (CBK), Kenya’s public debt stands at Sh 5.4 trillion.

In the financial year beginning July 1, 2019 Kenya will spend Sh 800 billion to repay maturing loans mostly owed to foreign lenders.

The budget as a share of Kenya’s Gross Domestic Product (GDP) is expected to decline to 28.1 per cent, from 32.4 per cent in 2018/19 financial year, a 4.2 per cent drop.

According to the Budget and Appropriation Committee, Sh 2.45 trillion will be allocated to the three arms of government, a slight increase from Sh 2.23 trillion in 2018/19 financial year.

Kenya budget: Kenya's National Treasury building is pictured in Nairobi
Kenya’s National Treasury building is pictured in Nairobi on June 14, 2018. (Photo by Yasuyoshi CHIBA / AFP)

Related: Kenyans protest bid to build East Africa’s first coal plant

The country’s judiciary remains the least funded of the three arms of government having been allocated Sh 18.88 billion. The Executive and Parliament have been allotted Sh 1.84 trillion and Sh 43.78 respectively.

In the past financial years, the Education sector has always received the lion’s share of the budget, likewise Sh 473.3 billion has been allocated to the sector; followed by Energy, Infrastructure and ICT which have been allocated a combined budget of Sh 406.7 billion.

Rotich’s budget today will crown the total Jubilee administrations ambitious spending to Sh 13 trillion over eight years against total tax collections of less than Sh 8 trillion over the same period.

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Zimbabwe declares interim RTGS dollar sole legal tender

The RTGS dollar was introduced in February 2019 as a first step towards a new currency by the year’s end

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Zimbabwe declares interim RTGS dollar sole legal tender
(File photo)

Zimbabwe has adopted its interim currency as the country’s sole legal tender on Monday in a bid to stem black market demand for foreign currencies.

The RTGS dollar was introduced in February 2019 as a first step towards a new currency by the year’s end. This is a main part of President Emmerson Mnangagwa’s plan to stabilise an economy racked by inflation and widespread shortages.

According to the official statement, “the British pound, United States dollar, South African rand, Botswana pula, and any other foreign currency shall no longer be legal tender alongside the Zimbabwe dollar in any transactions in Zimbabwe”.

The latest variation of the domestic currency, the RTGS, has struggled to gain trust among large corporations and everyday Zimbabweans. Economic analysts fear 2009 may repeat itself with the interim currency.

Last week, the International Monetary Fund (IMF) requested that the central bank allows the RTGS to float freely so that exporters could sell dollars at the interbank rate rather than surrender them to the central bank

On the official interbank rate, the RTGS currency was pegged at 6.2 but on Monday, it traded between 11 and 12 against the dollar on the unofficial market.

But, Zimbabweans are complaining that goods and services are still being priced in other currencies. While more than 80% of Zimbabweans earn RTGS dollars, goods ranging from bricks to rentals, car parts and many groceries have their prices pegged in U.S. dollars.

Inflation has climbed to a decade high 97.86%, eroding salaries and savings and causing Zimbabweans to fear a return to the hyperinflation of 2008 when the rate reached 500 billion per cent.

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Nigeria’s central bank will keep controversial FX system

Emefiele added that the bank also hopes to continue working with the Deposit Money Banks to improve access to credit

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Nigeria's central bank will keep controversial FX system

The Central Bank of Nigeria (CBN) has announced its plan for the next five years. The current governor of the bank, Godwin Emefiele stated the five main focal points of his second term to drive the Monetary Policy roadmap throughout 2019-2024 at the CBN Headquarters in Abuja.

In his words, “our priorities at the CBN over the next 5 years are the following; preserve domestic macro-economic and financial stability; foster the development of a robust payments system infrastructure that will increase access to finance for all Nigerians, thereby raising the financial inclusion rate in the country”, he says.

Emefiele added that the bank also hopes to continue working with the Deposit Money Banks to improve access to credit for not only smallholder farmers and MSMEs, but also consumer credit and mortgage facilities for bank customers.

“Our intervention support shall also be extended to our youth population who possess entrepreneurship skills in the creative industry. This group deserves our encouragement. We shall also during this intervening period encourage our Deposit Money Banks to direct more focus in supporting the Education Sector”.

Related: Nigeria’s apex bank to offer seven-year loans to youth corps members

In addition to these, there is also a need to grow the country’s external reserves and lastly, support efforts at diversifying the economy through the various intervention programs in the agriculture and manufacturing sectors.

The CBN Governor said he was confident that when implemented, the aforementioned measures will help to insulate the economy from potential shocks in the global economy.

Related: Senate confirms Emefiele for second term as Nigeria’s Central Bank governor

“In my second term in office, part of my pledge is to work to the best of my abilities in fulfilling these objectives,” he adds.

Emefiele was first appointed by former President Goodluck Jonathan in 2014 and was retained after Buhari assumed office in 2015.

On May 8, President Muhmmdu Buhari informed the Senate in a statement that he had decided to nominate the CBN governor for a second term.

Related: Nigeria’s Central Bank governor named for second term

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West Africa Crude-Nigerian OSPs boost seller confidence

In Angola, around half a dozen cargoes remain for July loading, while the preliminary programme for August added another 45 cargoes

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West Africa Crude-Nigerian OSPs boost seller confidence
(File photo)

Nigeria has increased its official selling price (OSP) for major crude grades on perked-up demand. Nigeria’s National Petroleum Corporation significantly raised the July OSP for major grades, Bonny Light 156 cents per barrel last month, to 204 cents and Qua Iboe, from 171 cents per barrel, to 215 cents.

The move shows the new confidence in Nigerian barrels of oil has been selling to Europe in June, due to shortfalls hitting competing North Sea fields. But at least, 20 cargoes remain for July loading, as preliminary August programmes were awaited imminently.

In Angola, around half a dozen cargoes remain for July loading, while the preliminary programme for August added another 45 cargoes.

China’s Unipec is still offering West African cargoes on the Platts Window after doing so for several grades last month, partly to attract market attention due to slow demand and also to offload unwanted crude.

Asian refining margins for 10 parts per million (ppm) gasoil, a key middle distillate refined from heavier Angolan barrels, slipped on Friday as crude prices rose, a sign that Asian demand for heavier West African (WAF) crude may remain sluggish in the interim.

Finalization of state oil company, Sonangol’s term allocations was expected, with sellers keen to see price markdowns for later selling of July cargoes to be continued into August. But as China draws down stocks of Iranian crude it bought in bulk in April ahead of U.S. sanctions, traders say Angola might be sought after especially as new commercial tanks are expected to come online very soon.

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