Kenya’s 2019/2020 Financial Year Budget estimates is projected to be KES3.08 Trillion. Of this, KES1.2 Trillion will go into recurrent expenditure, KES684 Billion for development and KES371.6Billion will be utilized by the 47 counties. Here are the Budget estimates as presented by Treasury Cabinet secretary Henry Rotich in Parliament on Thursday 13th June, 2019;
‘Theme: Creating Jobs, Transforming Lives – Harnessing the
“Big Four” Plan
Mr.
Speaker, Honorable Members and Fellow Kenyans, today, I present to the country the
highlights of the Budget for financial year 2019/20. I do this in performing my
fiduciary responsibility as the guardian of the nation’s finances and in
fulfilment of the requirements of Section 40 of the Public Finance Management
Act, 2012 and the Standing Order Number 241 of the National Assembly.
Mr. Speaker,
H.E. the President, Hon. Uhuru Kenyatta has on several occasions, including most
recently during the 2019 State of the Nation Address, set out an ambitious social-economic
development agenda that speaks to the Kenya we want. This has been captured
under the Big Four agenda which lays out key initiatives that will put Kenya on
a bold new path of rapid and shared economic growth, jobs creation at an
unprecedented pace and reduced poverty on a sustained basis.
Mr. Speaker,
the Budget for FY 2019/20 lays a strong foundation for achieving the President’s
Big Four agenda while at the same time addressing the following challenges
facing our economy:
- One,
creating an enabling environment for businesses, and in particular for the
micro, small and medium enterprises in order to accelerate the growth of our
economy and create more jobs for our youth;
- Two,
the need to be prudent and efficient in our spending;
- Three,
the need to mobilize domestic resources to fund priority projects and
programmes;
- Four,
the need to reduce our fiscal deficit in order to stabilize and reduce our debt;
and
- Five,
the need to implement reforms that will enhance our efficiency and make us more
competitive.
Before
addressing these challenges, allow me Mr.
Speaker to say a few words on the recent economic developments and outlook.
Mr. Speaker,
our economy continues to be resilient in the midst of significant global and
domestic headwinds. In 2018, our economy grew by 6.3 percent, up from 4.9 percent
in the previous year. This growth is the highest to have been recorded for the
past 8 years and well above the sub Saharan Africa region average growth of 3.0
percent and the global average of 3.6 percent, reinforcing the advantages of a
diversified and reforming economy. This strong growth was attained despite the
rising global trade frictions among major trading partners as well as
uncertainties from Brexit and renewed geopolitical risks.
Mr. Speaker, we project growth in 2019 to remain strong at around the same level as in 2018. While there are risks associated with delayed long rains which may impact negatively on agriculture, we expect such risks to be offset by continued strong performance in non-agricultural activities such as tourism and construction. Over the medium term, we expect growth of over 7.0 percent as programmed activities under the Big Four agenda gain traction.
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Mr. Speaker,
the risks to this outlook include an escalation of global trade-related tensions,
a rise in oil prices and weather related shocks. Should these risks
materialize, Kenya’s growth forecast could be constrained. However, the
Government will take appropriate measures to mitigate any negative impact on
growth.
Mr. Speaker,
let me now turn to how we are going to address the challenges facing us. Mr.
Speaker, the theme
for this year’s budget is: Creating Jobs, Transforming Lives
– Harnessing the “Big Four” Plan. This theme resonates with our strategies towards a
stronger economy that will generate more employment opportunities and provide
better livelihoods for Kenyans. In this budget
therefore, we are laying a firm foundation for accelerated growth and shared
prosperity.
II. Accelerating and sustaining inclusive growth
Mr.
Speaker, in order to achieve
rapid and inclusive economic growth and expand job opportunities for the youth,
we must continue to improve the business climate in order for our private
sector to thrive. Therefore, we must continue to implement prudent fiscal and
monetary policies in order to achieve a low rate of inflation, low but
sustainable interest rate and a competitive exchange rate.
In
addition, we will continue with our ambitious business reform initiatives in
order to reduce the cost of doing business and encourage private sector
innovation and entrepreneurship. Our current
ranking of 61 out of 180 countries in the World Bank’s doing business indicators
is not only the best ranking we have had so far, but it is also an indication
of our resolve to improve our business climate and become a top investment
destination. Our aim in the next few years is to be among the top 50 nations in
the World by continuing to strengthen our reform agenda.
Mr. Speaker,
last year, I amended the Income Tax Act, to provide for a deduction of thirty
percent (30%) of the total electricity by manufacturers as rebate subject to
the conditions to be set by the Ministry of Energy. Mr. Speaker, the Ministry of Energy in consultation with the
Ministry of Industry, Trade and Cooperative Development has now developed the framework
that will be used so that manufacturers can enjoy this incentive. We expect this
incentive to reduce the cost of electricity to manufacturers by about 20% and to
make our products competitive in the region, and this should spur economic
growth and create employment for the youth.
Mr.
Speaker, the large accumulation
of VAT refunds with KRA arising from VAT on zero rated supplies has impacted
negatively on the cash flow and liquidity of our manufacturers and
the business community at large. In order to fast track the return of these
funds to the rightful owners, I have constituted a team at the National
Treasury to quickly validate the outstanding refunds with a view to clearing
them within the next two months. Mr.
Speaker, in addition there has also been a large accumulation of VAT refunds at KRA, which emanate from the 6
percent VAT Withholding Tax. We are currently working on the modalities for
settling these obligations and I intend to engage the business community
immediately in order to come up with a workable solution. Going forward, we
intend to lower the VAT Withholding Tax to a level that will eliminate the need
for KRA to make refunds. I will be making proposals to lower the VAT Withholding
rate under the tax proposals later in this Budget Statement.
Mr. Speaker,
on the pending bills, we have reviewed existing pending bills as directed by H.E.
The President during this year’s Madaraka Day celebrations. In addition to the payments
we have made so far, we have prioritized payment of Ksh 10.9 billion of the verified
pending bills which will be paid before end of this month. This should
eliminate most pending bills owed to the youth, women and persons living with
disabilities under the Access to Government Procurement Opportunity. The clearance
of this backlog should improve liquidity to our suppliers and contractors and
thereby boost our economy.
Mr. Speaker,
our micro,small and medium enterprises (MSMEs)
play a critical role in wealth and employment creation.
We
have listened carefully to their concerns which include limited access to
credit, entrepreneurial skills and markets, as well as a cumbersome regulatory
and working environment.
Mr. Speaker,
to facilitate faster clearance of cargo, H.E. The President in May 2019,
directed the Ministry of Interior and Coordination, in collaboration with other
Government Agencies, to ensure all import and export consolidators undergo
strict vetting, registration and gazettement before they are allowed to operate
at all the ports of entry and clearance. This will reduce delays in cargo
clearance into the country for most small cargo importers operating under the
consolidators; reduce tax evasion; curb the illegal importation of contraband
and counterfeits goods; and reduce delays in cargo clearance into the country.
Mr. Speaker,
the Government has been supporting MSMEs through various affirmative action
funds including the Uwezo Fund, Youth Enterprise Development Fund and Women
Enterprise Development Fund. To increase efficiency and eliminate overlaps,
I have consolidated the three Funds into one to be known as Biashara Kenya
Fund. The Fund will give special priority to businesses owned by youths, women
and people living with disabilities. The Regulations establishing the new Fund have
been published after being subjected to stakeholder consultations and I will be
submitting them to this House today. Mr.
Speaker, to further improve access to credit for SMEs, last month, we
endorsed a mobile loan product known as Stawi
loans which offers unsecured loans to small enterprises.
Mr.
Speaker, the Government through the Ministry of Information,
Communications and Technology in Partnership with Academia, Civil Society and
the Private Sector has set up a program known as “Ajira Digital Program” whose
aim is to bridge the gap between skills available and skills demand. A major
objective of the program is to enable over one million youths annually to be
engaged as digital freelance workers. In order to provide stability for the
youth engaged in this program, the Government has proposed that the youth
registered in the program pay a registration fee of ten thousand Kenya
shillings for the next three years in lieu of income tax with effect from 1st
January 2020. In this regard, Mr. Speaker, I propose to amend the Income
Tax Act in order to exempt registered members from regular taxation for the
specified period.
Mr.
Speaker, this registration fee will be paid to the Ajira Fund
through which the youth-oriented program will be financed for the benefit of
our young people who need to be engaged in tangible programs. In this regard, a
framework for the registration of the Ajira members, the modalities of
collecting the fee as well as the structure for the utilization of the Fund
will be put in place. Mr. Speaker,
this Fund
that will promote growth of local business that generate digital and
digitally-enabled jobs. In this respect, I have set aside Ksh
1.0 billion as seed capital for the Fund. I encourage the Youth
and Women to take advantage of this funding window to establish and grow their
businesses.
Mr. Speaker,
in order to take full advantage of the preferences and reservations in the
procurement Act and promote local industries through the ‘Buy Kenya Build
Kenya’ initiative, we are in the process of developing a catalogue of items
that are locally manufactured, assembled, mined or grown in Kenya and which
will be given priority in public procurement. Accordingly, no tax exemptions
will be provided for any items on the catalogue.
In
this respect, Mr. Speaker, with
effect from 1st July 2019, all Ministries, Departments, Agencies and
other Public Entities are required to give exclusive preference in procurement
of motor vehicles and motor cycles from firms that have assembly plants in
Kenya. This will go a long way in spurring the growth of local auxiliary
industries and enterprises and create employment opportunities to the youth.
Mr. Speaker, we have received
numerous complaints relating to late payment, and even non-payment of suppliers
by businesses and contractors who enjoy relatively superior bargaining
positions. The most affected are Small and Medium Enterprises. To address this
situation, Mr. Speaker, I have
proposed amendments to the Competition Act to empower the Competition Authority
to deal with abuse of buyer power and ensure prompt payment to suppliers. The
proposed amendments shall also provide for penalties for infringement of these
provisions.
Further,
Mr. Speaker, going forward the
National Treasury will endeavor to ensure that payments to suppliers of goods
and services to the National Government are made within a maximum of 60 days.
This, Mr. Speaker, will support our
MSMEs and the business community. I expect all the 47 County Governments to take
cue from this and ensure prompt payments for all supplies delivered to their
respective Counties.
Mr. Speaker,
Government will streamline the process of Pre-Verification of Conformity (PVOC),
so that our business community stops suffering demurrage charges and other costs
while clearing their goods at the point of entry. This has been caused by
additional inspections of imports by the Kenya Bureau of Standards and a host
of other agencies. Mr. Speaker, to
address this challenge, it has been decided that once the Pre-Verification of
Conformity (PVOC) has been done at the point of export and information relayed
to our Customs and Standards teams, the same goods should not be subjected to
further inspection unless there is prior intelligence on non-compliance. In
addition, Mr. Speaker, the logistics
at the Port and at the Inland Container Depot will be streamlined to have the
customs and the essential Standards team only.
III. Improving Expenditure Efficiency
Mr. Speaker,
turning to expenditures, we must ensure that our scarce resources are used in
the most efficient and effective manner. Accordingly, since the start of this
financial year, Government has implemented new initiatives to contain growth of
expenditure. First, we adopted a
zero-based budgeting process to weed out non-priority expenditures from the
budget; second, we have adopted a
policy of “no new projects” to ensure that Government completes ongoing
projects; third, we are reviewing
the portfolio of externally funded projects with a view to restructuring and
re-aligning them with the “Big Four” Plan; and, fourth, we are taking measures to reduce spending on some specific
programmes which are not of high priority. All these initiatives, Mr. Speaker, have helped to lower our
expenditures.
Going
forward, Mr. Speaker, we will continue
to take bold actions to contain our expenditures further in the next financial
year in order to further reduce the deficit. This will entail the following:
Mr. Speaker, the
public sector wage bill continues to rise leaving fewer and fewer resources for
development. Certainly, this is not
a good practice and no meaningful development can be realized, unless we
reverse the trend. Mr. Speaker, in order to contain the wage
bill, I propose that we limit strictly the extension of service for the significant
number of civil servants who are retiring after the age of 60 years. In
addition, Mr. Speaker, we will restrict
new recruitment to key technical staff, security personnel, teachers
and health workers. Further, Mr. Speaker, a cleansing of the wage
bill will be undertaken to root out ghost workers. Government will also fast
track migration away from the current Integrated Payroll and Personnel Database
System (IPPD) to IFMIS Human Resource Module to improve payroll management.
Mr. Speaker, expenditure
on domestic and foreign travel has been growing due to frequent travels. To
limit this expenditure, we are exploring the use of a more efficient cost
cutting approach, including use of electronic cards system for
all public officers travelling within and outside the country. This card would be
pre-loaded with subsistence allowance to be expended by Officers travelling on
official duty on eligible expenditures only.
Mr. Speaker, the Cabinet is considering
a new Government transport policy that will standardize the institutional
framework for fleet management and use of fuel cards across Government in order
to improve efficiency and cut cost. In addition, the policy will promote local
industries by requiring that all Government vehicles be procured only from
local assembling plants.
Mr. Speaker, the Government has been
leasing office space at higher than market rates resulting in huge costs to the
Government. Beginning 1st July 2019, all procurement of office
accommodation by Government will be standardized with uniform cost leases and existing
contracts will be renegotiated to ensure a standard rate.
Mr. Speaker, we are on course towards
providing an electronic end-to-end solution on all procurement processes. Mr. Speaker, this will significantly
enhance efficiency, transparency and accountability in procurement. It will
further provide procurement audit trails, enhanced reporting and procurement
analytics for better monitoring of the public procurement system, efficient and
electronic archiving of procurement records and availability of online appeal
and complaint mechanism, among others.
Mr. Speaker, we are now in the final
stage of issuing the new Public Procurement and Asset Disposal Regulations to
fully operationalize the Public Procurement and Asset Disposal Act, 2015. Our
assessment shows that significant savings can be achieved under Framework Procurement
and new institutional arrangement for Common User items that have been
instituted in the new Regulations.
Mr. Speaker, the pension budget has
increased by over three fold in the last 10 years from Ksh 25 billion in
FY2008/09 to Ksh 86 billion in FY 2018/19. This is unsustainable. Between February
and May 2019, we conducted a payroll cleansing exercise for pensioners and
dependants at the Huduma Centres across the country, to authenticate the
approximately 270,000 recipients of monthly pension paid by the Government. We are finalising the analysis and we expect cost
savings. Pension management is also being improved with migration to IFMIS
since May 2019.
Mr. Speaker, to address the challenge
of the rising pensions budget, we have finalised a new National Pensions Policy
and the Public Service Superannuation Scheme (PSSS). This scheme, which will be
rolled out in the FY 2019/20, will ease the pension burden on the exchequer and
free resources for other critical national priorities while at the same time
ensuring that the pension budget remains sustainable. This scheme will allow
portability of pension benefits thus allowing free movement of staff into and
out of Government.
Public
Investment Management
Mr. Speaker,
the Government will issue Public Investment Management Regulations which will
provide a framework for appraising and approving new projects to be funded
through the Government budget. In order to enhance transparency and
accountability,all the approved and
on-going projects will be available in a Public Investment Management Information
System portal.
IV. Increasing Tax Collection
Mr. Speaker,
in addition to the expenditure measures that I have just enumerated, domestic
revenue mobilization will be critical to helping us achieve our fiscal deficit
target.
Mr. Speaker,
I will be coming back later in this Budget Statement to our proposed taxation measures
that will make our tax system more efficient and strengthen our revenues.
Meanwhile,
in terms of administrative measures to enhance revenue collection and seal
revenue loopholes, a number of initiatives are underway, including:
- Sustaining the fight against illicit
and counterfeit trade that was launched last year;
- KRA will continue to strengthen and
upgrade the ICT systems, including the full rollout of the integrated customs
management system which has been delayed for too long;
- Information sharing through Memorandum
of Understanding (MoUs) with other jurisdictions to support the fight against
cross-border tax evasion;
- Revenue Enhancement Initiatives (REI)
that target among others: enhanced scanning of containers to detect concealment;
Implementation of a Regional Electronic Cargo Tracking system to tackle transit
diversions; Implementation of new debt collection strategy; Resolution of tax
disputes; and enhancing investigative capacity to support revenue collection.
Mr. Speaker, we expect
the above administrative measures to significantly boost our revenue efforts.
Mr. Speaker, in
the coming financial year, we expect revenues, including A-i-A of Ksh 2.1
trillion (19.7 percent of GDP). Expenditures and net lending are
projectedat Ksh 2.8 trillion (25.7
percent of GDP), leaving a fiscal deficit including grants of Ksh 607.8 billion.
In relation to GDP, this deficit translates to 5.6 percent, a decline from 6.8
percent in FY 2018/19 and 7.4 percent for FY 2017/18.
Mr. Speaker, the
fiscal deficit of 5.6 percent of GDP in FY 2019/20 will be financed by net
external financing of Ksh 324.3 billion (3.0 per cent of GDP) and net domestic financing
of Ksh 283.5 billion (2.6 per cent of GDP).
Mr. Speaker,
we shall continue to remain on this planned path of reducing the fiscal deficit in the medium
term in order to create more fiscal space and to reduce the public debt.
Mr.
Speaker, resource
mobilization through borrowing will be in accordance with the Public Finance
Management Act, 2012 and guided by the annual Medium Term Debt Management
Strategy, which this House approves annually, and which seeks to minimize costs
and risks on public debt and borrowing. Official Development Assistance on high
concessional terms will be preferred for some of the external financing while
medium to long term Treasury Bonds will remain the primary source for domestic
financing.
Mr.
Speaker, Kenya
continues to meet its debt service obligations promptly with no accumulation of
debt arrears. Public debt is within sustainable levels and the debt burden is
projected to decline over the medium term as we implement fiscal consolidation plan.
Mr.
Speaker, the loan
proceeds we have contracted, primarily from our multilateral and bilateral
development partners have been used to finance development expenditures
including in such areas as ports, railway, roads, energy and water. This
infrastructure is critical to the expansion of our potential growth and
regional competitiveness and in making Kenya the African hub for
transportation, industrial and services sectors. Nevertheless, the borrowed
resources must be used wisely. Accordingly, the recently established Public Investment
Management Unit will be appraising all infrastructure projects before such
projects are committed in the budget, in order to establish their value for
money, affordability and economic return for the benefit of the current and
future generations in line with the Constitution of Kenya.
Mr.
Speaker, we have constituted
and strengthened the Public Debt Management Office at the National Treasury
under a Director-General to be responsible for public debt management and
operations. We have initiated a set of reforms to promote development of the
domestic debt market, an important source of financing for our development
programs. In particular, Mr. Speaker,
we plan to roll-out measures to enhance transparency and predictability in the
issuance and trading process for Treasury Bills and Treasury Bonds to enhance
efficiency, lower costs and risks, as well as develop an effective yield curve
for Government domestic debt securities. Given the importance of Eurobonds in
our debt portfolio, we will strengthen the debt office to adopt modern
liability management instruments to reduce cost and settlement risks, in
addition to introducing an investor relations unit.
VI. Transfers to Counties
Mr. Speaker, County Governments in the coming
financial year will receive a proposed allocation of Ksh 371.6 billion, of which,
Ksh 310 billion is the equitable share and Ksh 61.6 billion will be conditional
transfers, including Ksh 38.7 billion from our development partners. Mr. Speaker, I am well aware that the
proposal I have outlined above on the Division of Revenue between the National
and County Governments is subject to negotiations under the Joint Mediation
Committee established by the two Houses of Parliament. We look forward to the
speedy conclusion of the mediation process, which we expect will fully take
into account the provisions of Article 203 of the Constitution.
Mr. Speaker, in order to encourage
the Counties to optimize own source revenue collection, the National Treasury in
collaboration with the Council of Governors will implement the National Policy to Support Enhancement of
County Governments’ Own-Source Revenue. Further, as per the Presidential
Directive issued in February 2019, the National Treasury has established a
multi-agency team to develop and implement an Integrated Revenue Management
System for County Governments. This initiative is aimed at eliminating the leakages
and large costs currently incurred by Counties in their revenue collection
processes.
Mr. Speaker, during this financial
year, the County Governments’ Revenue Raising Process Bill, 2018 was submitted
to the National Assembly. Pursuant to Article 209(5) of the Constitution, this
Bill aims to regulate the introduction of levies by County Governments while ensuring
that Counties do not prejudice national economic policies, cross-County
economic activities; or, national mobility of goods, services, capital or
labour. I urge this House to prioritise the enactment of this Bill in order to
ensure better regulation of the process of introducing new levies by County
Governments to safeguard the gains made in improving our business climate.
Mr. Speaker, we expect Counties to manage their finances in a manner that is consistent
with the fiscal responsibility principles, as set out in the PFM Act, 2012,
with respect to development spending allocations, and control of expenditure on
personnel emoluments.
Mr. Speaker, we also expect Counties to adhere to the Policy of
clearing pending bills, pursuing austerity measures and completing ongoing
projects before embarking on new ones.
VII. Spending Priorities
Mr.
Speaker, let me turn to highlights of the Government spending priorities in
the coming financial year. Total programmed spending for the FY 2019/20 amounts
to Ksh 2.8 trillion.
Mr. Speaker,
H.E the President has outlined the four
big areas of focus. These are:
- Universal health coverage;
- Affordable housing;
- Increasing manufacturing contribution
to the economy; and
- Food and nutrition security.
Mr. Speaker,
let me outline how the budget speaks to the President’s priorities. Ministries,
Departments and Agencies while finalizing the expenditure estimates for the
next fiscal year and medium term were required to align their proposals towards
realization of the ‘Big Four’ Plan. In total, I have allocated approximately Ksh
450.9 billion to the “Big Four” Plan drivers and their enabling sectors.
Universal
Health Coverage
Mr. Speaker, a
healthy population is key in the attainment of social economic development. It
is for this reason that the Government has prioritized Universal Health
Coverage. To support UHC, I have allocated Ksh 47.8 billion to
activities and programmes geared towards universal health coverage. Some of the
specific interventions in this area include scaling up universal health
coverage to the rest of the Counties, NHIF cover for the elderly and severely
disabled. In addition, Mr. Speaker,
I have allocated Ksh 7.9 billion from the Sports, Arts and Social Development Fund to fund
the universal health care initiatives.
Mr. Speaker, other allocations to
improve health service delivery include Ksh
2.9 billion for Doctors/Clinical Officers/Nurses internship programme, Ksh
14.4 billion for Kenyatta National Hospital, Ksh 9.2 billion for Moi Teaching and Referral
Hospital, Ksh 2.3 billion for Kenya Medical Research Institute, Ksh 7.4 billion
for Kenya Medical Training Centres (KMTC) and Ksh 1.2 billion for Health Workers Internship Programme.
Affordable
Housing
Mr.
Speaker, the Government continues
to stay focused on providing decent and affordable housing for our citizens. To
that end, I have allocated Ksh 10.5 billion to cater for social housing
and construction of affordable housing units, including housing Units for the Police and Kenya
Prison. Included also is Ksh 2.3 billion for the Public Servants Housing Mortgage Scheme and Ksh 5.0 billion for the National
Housing Development Fund, as contributions by Government for its employees.
Mr. Speaker, with the recent
establishment of the Kenya Mortgage Refinance Company (KMRC) by H.E.
The President, Kenyans will now access affordable mortgage loans for purposes
of acquiring homes. KMRC has received capital injection of Ksh 1.0 billion
from Government, and Ksh 35 billion credit line from the World Bank and
the Africa Development Bank. KMRC has also received Ksh.1.2 billion from
other shareholders (Banks and SACCOs), and a further Ksh 400 million is
expected from other Development Financial Institutions (IFC and Shelter
Afrique) in form of equity injection.
Mr.
Speaker, investment in
manufacturing sector is key in transforming Kenya into a middle income economy.
Under the ‘Big Four’ Plan the goal is to increase its contribution to GDP,
create jobs annually, increase foreign direct investment and improve ease of
doing business. To support the manufacturing sector, we have scaled up reforms to encourage investments in industrial
sheds and parks. The electricity
rebates mentioned earlier will improve competitiveness in the sector.
Mr.
Speaker, Government has
completed the revival of one of the oldest textile company in Kenya based in Eldoret
(RIVATEX) and it is expected to be launched in the coming weeks. RIVATEX is
expected to employ over 3,000 employees when fully operational. In this budget
we have allocateda total of Ksh 1.1 billion for the development of
textile and leather industrial park, Naivasha Industrial Park and Cotton
Development subsidy. In addition,
we have allocated Ksh 1.7 billion to
support the growth of SMEs in the manufacturing sector; Ksh 0.4 billion to
Constituency Industrial Development Centers; and Ksh 1.0 billion to modernize facilities in Kenya Industrial
Research and Development Institute (KIRDI).
Mr.
Speaker, to enhance food and
nutrition security and support our farmers, Government is reforming its
agricultural policies and regulations as well as subsidies to farmers with a
view to make them efficient and less prone to rent seeking. With the unspent
funds for this current financial year and proceeds from sale of maize from
strategic reserve, the Strategic Food Reserve Trust Fund will have adequate
funds to buy food reserves and intervene to support farmers in accessing inputs
in a reformed arrangement in the coming financial year.
In this budget, I have set aside Ksh 2.0 billion for the National Value
Chain Support Programme; and Ksh 3.0 billion
for setting up the Coffee Cherry Revolving Fund to implement prioritized
reforms in the coffee sub-sector. In the coming financial year, coffee farmers
across the country will be able to access the Cherry Advance at a modest
interest rate of 3 percent. Mr. Speaker, in this current financial year,
Government supported sugar farmers by paying Ksh 2.1 billion debt for cane
deliveries to public mills. To cater for the outstanding balance, we have
provide for Ksh 0.7 billion.
Other provisions include Ksh 1.0 billion for crop diversification and to revitalize the Miraa industry; Ksh 0.8 billion for the rehabilitation
of Fish Landing Sites; and Ksh 0.7 billion for small-holder dairy commercialization. I have also allocated a total
of Ksh 7.9 billion for ongoing
irrigation projects.
Mr.
Speaker, allow me to turn to
the proposed expenditures on enablers that are critical to the realization of
the “Big Four” agenda.
Mr. Speaker, we willcontinue with infrastructure programme in order to improve our
competitiveness. I am therefore, proposing to allocate Ksh 180.9 billion for on-going roads construction projects as well as therehabilitation and maintenance of
roads.
We have also
provided Ksh 55.8 billion for the completion
of Phase 2A of the SGR, Ksh 11.0 billion for the LAPSSET Project; and Ksh 7.2 billion for the Mombasa Port Development Project.
Mr. Speaker, to support generation of adequate and affordable
energy, particularly, for our manufacturing sector, I have allocated, Ksh 8.6 billion for the geothermal Development; Ksh 61.2 billion for power transmission and distribution. This
includes Ksh 4.5 billion for
electrification of public institutions; Ksh
5.5 billion for Last Mile Connectivity; Ksh 1.3 billion for Connectivity Subsidy; Ksh 1.0 billion for street lightning and Ksh 1.5 billion for transformers in our constituencies.
Mr. Speaker, a safe and secure environment is a
precondition for achieving the “Big Four” agenda. Therefore, I have provided Ksh 326.5 billion for security agencies which includes: Ksh 121.6 billion for Defence, Ksh 37.7 billion for National
Intelligence Service; Ksh 26.9 billion
for Prisons Department; Ksh 140.5
billion for State Department of Interior. The allocation to the State Department of Interior includes Ksh 22.8 billion for House Allowance for the Police and Prisons,
and Ksh 6.9 billion for Police and
Prison Officers Medical Scheme.
Mr. Speaker, education continues to receive the lion’s share of
spending as Government continues to provide access to basic and higher
education as well as to skills development and training. Ksh 55.4 billion is allocated to
caterfor Free Day Secondary
Education Programme and Ksh 13.4 billion forFree Primary
Education Programme. To increase the teacher to student ratio, we have provided
Ksh 3.2 billion for the recruitment
of additional teachers. Other allocations include Ksh 1.5 billion for primary and secondary school infrastructure, Ksh 10.3 billion
for tuition and tools support to vocational training, Ksh 6.8 billion for the construction
and equipping of technical institutions, Ksh
4.0 billion for examinations fee waiver for all class eight and form four
candidates, and Ksh 4.0 billion for
NHIF Insurance for secondary school students.
Mr. Speaker, I have further set aside Ksh 97.7 billion
to support University Education; and Ksh 12.6 billion to the Higher Education Loans Board.
Mr. Speaker, in my Budget Statement last year, I highlighted some of the measures to
improve governance and transparency and accountability of Government. Procurement
reforms included the requirement for all MDAs to continuously publish and publicize
all details of procurement information and contracts awards on the Public
Procurement Information Portal. Mr.
Speaker, this portal was developed and launched. The Public Procurement
Regulatory Authority continues to publish monthly contract awards by all Public
Entities in the Portal. To date, 385
Public Entities have been registered in the portal, and 5,236 contracts
published valued at Ksh 146.5 billion.
We expect further transparency with implementation of a new end-to-end
e-procurement system fully integrated with IFMIS.
Mr. Speaker, to sustain the drive against corruption, I have enhanced allocations to
the institutions mandated to fight corruption. In particular, Mr. Speaker, we have allocated Ksh Ksh 2.9 billion to the Ethics and Anti-Corruption Commission, Ksh 3.0 billion
to the Office of the Director of Public Prosecutions, Ksh 149.0 million to the Unclaimed Assets
Recovery Agency, Ksh 50 million to
Asset Recovery Agency, Ksh 540.8 million
to the Financial Reporting Centre, Ksh
7.1 billion to the Criminal Investigations Services, and Ksh 5.7 billion
to the Office of the Auditor General.
Additionally, Mr. Speaker, to support the oversight and legislative role of
Parliament and access to justice, I have allocated Ksh 40.5 billion to Parliament and Ksh 19.4 billion
to the Judiciary.
Mr. Speaker, the rapidly developing digital economy provides
opportunities to boost our economic growth and create jobs. Therefore, we need
to invest more in this area to boost literacy and digital skills. We also need
to invest in digital infrastructure and improve access to affordable broadband
connectivity.
Thus, Mr. Speaker, to support the ICT sector
and take advantage of the digital dividend, and consolidate Kenya’s leading
position in the technology space, I have allocated Ksh 3.2 billion for the Digital Literacy Programme; Ksh 2.9 billion for Government Shared
Services; Ksh 2.8 billion for National Optic Fibre Backbone Phase II
expansion and Ksh 1.1 billion for
Installation of an Internet Based 4000 Network. I have also set aside Ksh 7.2 billion for the on-going
construction of Konza Technopolis Complexand another Ksh 5.1 billion tosupport the Konza Data Centre and
Smart City Facilities project.
Mr. Speaker, to share the benefits of
our growing economy and to relieve the plight of the vulnerable members of our society,
we have provided Ksh 16.6 billion
for cash transfers to the elderly persons;
Ksh 7.9 billion for orphans and vulnerable children (OVC); and Ksh 1.1 billion for cash transfers to
persons with severe disabilities.
Also, we have set aside Ksh 2.3 billion for the Kenya Hunger Safety Net Programme; Ksh 0.1 billion to support those with Albinism
and Ksh 0.2 billion for the National
Council for Persons with Disabilities Fund.
Mr.
Speaker, to support sports,
culture and arts, I have also allocated:
Ksh 5.3 billion from the Sports, Arts and Social Development Fund to
support the youth, women and persons living with disabilities in areas such as
sports and arts.
Mr. Speaker, to promote equitable regional development, we have
provided Ksh 41.7 billion for the National Government Constituency
Development Fund; and Ksh 2.3 billion
for Affirmative Action Fund to promote regional equity and for social
development. We expect these Funds to augment National Government functions
especially school infrastructure to ease the shortages associated with the 100
percent transition policy. I have also
allocated Ksh 5.8 billion for the Equalization Fund to finance
programmes in the marginalized areas.
Mr. Speaker, the
rest of my presentation summarizes various tax measures and miscellaneous
amendments that I intend to introduce through the Finance Bill, 2019 and
Regulations to realize the objectives set out in the “Big Four” Plan. The tax policy
measures in this budget are expected to generate an additional Ksh 37.0 billion, in tax revenue to the
Exchequer.
Income Tax
Mr. Speaker, the
new Income Tax Bill that benefitted from extensive public consultations is at
the final stage of legal drafting before it is submitted to this House shortly.
Accordingly, I will make limited changes to the Income Tax Act to enhance
equity and fairness.
Mr. Speaker,
after four years of implementation, there is need to review the Capital Gains
Tax legislation in order to enhance equity and fairness as well as harmonize
the rate with other jurisdictions, including the East Africa Community region,
where the rate ranges from 20% to 30%. Consequently, I propose to increase the
rate of Capital Gains Tax from 5% to 12.5%.
Further,
Mr. Speaker, in order to allow for
seamless restructuring of corporate entities, I propose to exempt from the
Capital Gains Tax the transfer of property that is necessitated by
restructuring of corporate entities. This measure will allow corporate entities
to restructure their operations for efficiency and market penetration.
Mr. Speaker, with
the increasing demand to mobilize resources, there is need to expand the tax
base and enhance our revenue. Over the years, with the expanded economy, there
has been an increase in services that are offered on commercial basis some of
which are not within the ambit of withholding tax. I therefore propose to expand the scope of
application of withholding tax by subjecting additional services, other than
management and professional fees, to withholding taxes. Mr. Speaker, these
services include security services, cleaning and fumigation services, catering
services offered outside hotel premises, transportation of goods excluding air
transport services, sales promotion, and marketing and advertising services.
This measure will enhance tax compliance by persons offering these services.
Mr. Speaker, the
Kenyan economy, and the world economy at large, is fast changing to keep up
with technological advancements. In particular, the digital economy is fast
evolving thereby posing challenges to taxation. This Mr. Speaker, is due to the unparalleled reliance on intangibles,
the massive use of data, the widespread adoption of multi-sided business models
and the difficulty of determining the jurisdiction in which value creation
occurs. This has led to erosion of our tax base hence low tax revenue since the
existing system is not equipped to deal with these emerging challenges. In this
regard, Mr. Speaker, I have proposed
a raft of tax measures that are aimed at providing the platform for taxation of
income generated from the digital economy so as to boost our revenues for
inclusive economic development.
Mr. Speaker, in my
budget statement last year, I had indicated that the draft Income Tax Bill,
2018, would be submitted to Parliament for enactment. The bill is at an
advanced stage of legal drafting and I will soon be submitting the same to this
House. This Bill will modernize our Income Tax legislation so as to boost
revenue mobilization.
Value Added Tax
Mr. Speaker, the
VAT Act provides for refund of tax where the input tax exceeds the output tax for
taxable supplies and full of input tax attributed to zero-rated supplies. In
2017, the VAT Regulations introduced a formula for determination of the amount
of refund payable to taxpayers who supply both zero rated and standard rated
supplies. However, the application of the formula is adversely affecting exporters
as they are not able to fully recover the excess input tax relating to
zero-rated supplies. To address this, I propose to adjust the VAT refund
formula in order to ensure that these taxpayers are able to fully recover the
portion of input tax relating to zero-rated supplies. This measure will boost
Kenyan exports and make them competitive in the international market.
In
addition, Mr. Speaker, the Value
Added Withholding Tax system has been in operation for some time now. However,
the implementation of the system has encountered challenges, the major one
being a build-up of huge credits, yet the law does not provide for refund of
the same to the taxpayers. Mr. Speaker, in order to address these
challenges, I propose to reduce the rate of VAT Withholding from 6% to 2%. This
will not only help reduce the build up of VAT refunds, but will also help enhance
the cash flow of our business community and stimulate economic activities and
job creation.
Mr. Speaker, Kenya
is positioning herself as a leading assembler of electronics and computers
within the region. This development initiative will transform Kenya into a
major manufacturer and supplier of electronics and computers in the East Africa
Community. Mr. Speaker, in order to
encourage the growth of this sector, I propose to exempt from VAT locally
manufactured motherboards and all inputs used in their manufacture. This will
make them more competitive against imported motherboards.
Mr.
Speaker, the government has made tremendous efforts in protecting
our environment. The country has banned the use of plastic bags to reduce
pollution and provide clean environment to its citizens. However, other forms
of plastic waste remain a major cause of both land and water pollution. Mr.
Speaker, to address this challenge, there is need to promote plastic waste
management by encouraging recycling of plastic waste. In this regard Mr.
Speaker, I propose to exempt from VAT all services offered to plastic
recycling plants and supply of machinery and equipment used in the construction
of these plants. Further, to encourage investment in plastic recycling I
propose to lower corporation tax to 15% for the first five years for any
investor operating a plastic recycling plant.
Customs Duty
Mr. Speaker, on
matters relating to Customs, I have proposed measures intended to make our
products more competitive while at the same time protecting local industries
from unfair competition. This will support the manufacturing sector under the
Big Four plan which is expected to grow to 15% of GDP by 2022. Mr. Speaker, the details of the Customs
measures will be communicated through the EAC Gazette and will be effective
from 1st July this year. I wish to highlight a few of them.
Mr. Speaker, our
Metal and Allied sector continues to face stiff competition from imported cheap
and subsidized iron and steel products. In order to protect this industry, I
have retained the ad valorem rate of import duty at 25% with corresponding
specific rates of duty in a wide range of these products which are produced in
the region.
Mr. Speaker, Kenya
has sufficient capacity to produce some paper and paper board products and
therefore there is need to protect these industries. However, the common
external tariff on these products is 10%. To protect manufacturers of these
products from unfair external competition, I have proposed that the import duty
rate which was increased last year to 25% for a one-year period be maintained
for another one-year period.
Mr. Speaker, as you
may be aware the Government banned the logging of trees to stop deforestation.
However, our manufacturers who use raw timber to manufacture furniture and
other products are affected by this measure as they now lack adequate supply of
raw timber. To address their plight and at the same time protect our forests, I
have proposed to reduce import duty on raw timber from 10% to 0%. In addition, Mr.
Speaker, to protect the timber and furniture industry from proliferation of
cheap finished timber products and to enhance local production, I have proposed
to retain an ad valorem rate of import duty at 25% with corresponding specific
rate of import duty on the products.
Excise Duty
Mr. Speaker,
betting has become widespread in our society and its expansion has had negative
social effects, particularly to the young and vulnerable members of our
society. In order to curtail the negative effects arising from betting
activities, I propose to introduce excise duty on betting activities at the
rate of ten percent of the amount staked.
Mr. Speaker,
although currently there is low uptake of electric powered motor vehicles in
the country, green energy technology is being embraced in many countries due to
environmental benefits and renewability. Kenya too needs to promote the use of
this clean type of energy in line with the sustainable development goal 7 which
can be achieved through lowering the cost of these vehicles through tax
incentives. Mr. Speaker, this will
encourage uptake of these vehicles as well as encourage investment in this area
of technology. Further, it will support the policy on green energy thereby
reducing carbon emission. In this regard, Mr.
Speaker, I propose to reduce the excise duty on motor vehicles that are
fully powered by electricity to 10%.
Mr.
Speaker, Excise revenue has declined from approximately 3% of GDP in
2003/04 to about 2% in 2017/18. The law currently provides for an annual
inflation adjustment for excisable goods that have a specific rate. The
adjustment was done last year and the rates of excise duty on these goods were
increased by 5.2%. Mr. Speaker, although the rates will be adjusted
again in July 2019 by the inflation rate provided by the Kenya National Bureau
of Statistics, the adjustment may not be adequate to address the declining
trend of the excise revenues. Mr. Speaker, in order to address this
decline and to boost excise revenues, I propose to increase the rates of excise
duty on cigarettes, wines and spirit by 15%.
In
other words, Mr. Speaker, excise duties on alcohol and tobacco will be
increased as follows: a 750ml bottle of wine will have an excise duty of Ksh 136 which is Ksh 18 more from the current rate; the duty of a bottle of whisky
will go up by Ksh 24 to Ksh 182 for a 750ml bottle. The excise
duty on a packet of 20 cigarettes will increase by Ksh 8 to Ksh 61 per
packet.
Tax Procedures Act
Mr. Speaker, the
Government introduced the Growth and Enterprise Market Segment (GEMS) with
favourable listing conditions for the SMEs to raise finance from the capital
markets for growth. However, the uptake has not been good in view of potential
back taxes that the enterprises may be facing. In this regard, Mr. Speaker, I propose to introduce an
amnesty on the tax penalties and interest, on any outstanding tax for two years
prior to the listing, for SME’s that list under the GEMS program to encourage
them to list and clean their tax records. The principal taxes shall however be
paid in full.
Mr. Speaker, the
Government is keen to position Kenya as a prime financial centre in East
and Central Africa. The first step to achieving this is to make our financial
services accessible to both Kenyans and our visitors. Currently, Mr. Speaker, the law requires one to
have a KRA PIN before opening bank accounts. This poses challenges to visiting
foreigners, privileged persons and foreign investors investing in our financial
markets. In this regard, I propose to amend the Tax Procedures Act to empower
the Commissioner to grant exemption from the PIN requirement, in certain
circumstances, when opening a bank account.
Fees and Levies
Mr. Speaker, last
year, through the Finance Act 2018, I introduced an anti-adulteration levy on
illuminating kerosene in order to check the menace of adulteration of fuel. In
addition to reducing the adulteration of fuel products, this levy has increased
the cost to manufacturers of paint and resin who use illuminating kerosene as
inputs. In order to address this problem Mr.
Speaker, I propose to introduce a provision, under the Miscellaneous, Fees
and Levies Act, 2016 that will allow manufacturers of paint and resin to get
refund on the levy paid.
Mr. Speaker, in
order to further cushion our local manufacturers, and facilitate the growth of the
sector, I propose to reduce the import declaration fee (IDF) on intermediate
goods and raw materials used by manufacturers from 2% to 1.5%, while increasing
the rate on finished goods from 2% to 3.5%. In addition, Mr. Speaker, I am proposing to raise the Railway Development Levy
for finished products from 1.5 percent to 2.0 percent to further cushion our
manufacturers.
Mr.
Speaker, raw hides and skins are currently subject to export levy.
This measure has had a significant impact in increasing value addition in the
sector. However, the levy does not apply to tanned and crust hides and skins
which are also being exported at the expense of value addition. Mr. Speaker,
in order to further accelerate value addition and promote the manufacturing of local
leather products, I propose to impose export levy on tanned and crust hides and
skins at 10%.
Financial Sector
Mr. Speaker, the
Capital Markets Authority is responsible for promoting, regulating and
facilitating the development of an orderly, fair and efficient capital market
in Kenya. In order to effectively deliver on this mandate, the Authority
requires powers to sanction the players in the market in case of a default. In
this regard, Mr. Speaker, I have
proposed amendments to the Capital Markets Act to empower the Authority to enforce
penalties and sanctions on market players who violate laid down rules and
procedures.
Mr. Speaker, the
Policy Holder’s Compensation Fund was established to cushion holders of
insurance policies in the event that insurance companies are unable to
discharge their services. However, Mr. Speaker, the Fund has not been
utilized since its establishment in 2004, despite 4 insurers going under
statutory management. This is because the current provisions of the law only
allow compensation to claimants of an insolvent insurer. To address these
challenges, I have proposed amendments to the Insurance Act and the Regulations
to bring clarity and enable the Fund to be utilized to compensate claimants.
Mr. Speaker, boda-boda
transport has become an important sector in our economy, it is one of the
largest employers of our youth and also provides cheap and convenient transport
for Kenyans. Despite the above benefits, Mr. Speaker, this mode of transport has
proven to be very risky to the riders, passengers and even pedestrians.
Further, Mr. Speaker, the accident
victims, who are mostly from the lower cadres of the society, are left to seek
financial assistance for treatment from friends and relatives since these boda
bodas are not insured. In order to mitigate against these risks, Mr. Speaker, I propose to amend the
Insurance (Motor Vehicle Third Party Risks) (Certificate of Insurance) Rules to
require all passenger carrying boda bodas and tuk-tuks to have an insurance cover
for passengers and pedestrians.
Mr. Speaker, the
Retirement Benefits Schemes that invest in guaranteed funds are subjected to
unfavourable terms of exit. In particular, the schemes are required to withdraw
funds in instalments spread over three years otherwise they suffer a charge of
up to 25% of the Fund value. This exposes members to low returns on the fund balance
due to an extended transfer period. Therefore, Mr. Speaker, I have proposed to amend the Retirement Benefits Act
to reduce the period of transfer to one year so as to allow members to access
better returns.
Mr. Speaker, while
both Individual and Occupational Regulations under the Retirement Benefits Act
make provision for creation of reserve funds in the defined contribution
schemes, the schemes are not required to make provisions for distribution of
the reserve funds in the rules. This has made some members exit without
accessing their entitlement to the reserve funds. In this regard, Mr. Speaker, I propose to amend the
Occupational Benefits Regulations and Retirement Benefits Regulations to ensure
that the exiting members receive their equitable share of the reserve funds.
Mr. Speaker, last
year I introduced amendments to allow contributions for post-retirement medical
funds in the Occupational and Individual Retirement Benefit Schemes
Regulations. This was meant to enable members of these schemes to contribute
for a medical scheme to be accessed after retirement as a form of social
security. In order to ensure that many Kenyans enjoy this opportunity. Mr. Speaker, I proposed to further
amend the Umbrella Retirement Schemes Regulations to allow members of the
Umbrella Retirement Benefits Schemes to contribute towards Post-retirement
Medical Fund. This will also contribute to the achievement of Universal Health
Coverage.
Mr.
Speaker, in order to establish the legal framework for the
operation of the National Electronic Single Window System, I will soon submit
the National Electronic Single Window Bill, 2019 for deliberation by the
National Assembly. Mr. Speaker, the Bill proposes to legislate the use of the National
Single Window System as well as reestablish the Kenya Trade Network Agency. In
addition, the Bill also seeks to amend various Statutes to recognize and
formalize the issuance of electronic certificates/permits that are currently
issued by various Agencies through the System.
Mr. Speaker, the
aim of the interest rate capping introduced in September 2016 was to reduce the
cost of borrowing, increase access to credit and higher return on savings. It
is now going to three years and the law has had the opposite effect with micro,
small and medium enterprises (MSMEs) starved of credit and the loan books of
small banks becoming smaller.
Mr. Speaker, you will recall in the Finance
Bill, 2018, I proposed to amend the Banking (Amendment) Act, 2016 by repealing
section 33B of the Act. The proposal was motivated by the need to enhance
access to credit and minimize the adverse impact of the interest rate capping
on credit growth while strengthening financial access and monetary policy
effectiveness. In addition, I highlighted a number of reforms that we were putting in place to optimize
lending to the private sector while at the same time encouraging innovation in
the financial sector in Kenya. Already the Central Bank of Kenya is dealing
with consumer protection issues in the banking sector.
Mr. Speaker,
given the challenges that MSMEs are facing in accessing credit from the banking
sector and conscious of the need to spur business activities, I am in this year’s
Finance Bill proposing a repeal of section 33B of the Banking (Amendment) Act,
2016. I am convinced this will unlock credit to the private sector and in
particular to the MSMEs.
Further,
Mr. Speaker, we will be launching an “SME Credit Guarantee Scheme” in a
few weeks’ time, to deepen access to credit by SMEs without being subjected to
complex application procedures and collateral requirements. This together with
Biashara Kenya Fund and SME Fund will address the very reason why interest rate
caps were introduced.
Mr. Speaker, the aforementioned reforms will not only address
shortcomings in the credit market but will also catalyze provision of credit to
support the Government’s “Big Four” Plan.
Mr. Speaker,
the budget is also about insulating ourselves against future risks and
sustaining our long-term development agenda.
Mr. Speaker,
the funds allocated in the budget for infrastructure development are not
adequate to meet the growing needs for quality and sustainable services and to
support the “Big Four” Plan. In this respect, the Government will continue to leverage
on the private sector to fund infrastructure development through public private
partnership arrangements.
Mr. Speaker,
we have already made great strides in this area, and have awarded the Nairobi –
Nakuru – Mau Summit Toll Road Project and approved development of the
JKIA-James Gichuru Nairobi Expressway Project to be done under the PPP
framework. These projects are expected to commence soon and will significantly
reduce traffic in Nairobi City and on the Nairobi-Nakuru highway.
Mr. Speaker,
as the host Nation of the United Nations Environment Programme (UNEP), Kenya
remains a global leader in Environmental Conservation and Sustainable
Development. Mr. Speaker, we have continued to champion the
green economy by spurring industrial growth in a manner that protects the
environment from the effects of climate change. We are also committed to expand
our forest cover from 7.2 percent to the 10 percent target.
Mr. Speaker,
building on our commitment to foster a sustainable environment, we have issued
another ban on single use plastics in all our protected areas, including:
National Parks, beaches, forests and conservation areas. The ban shall be
effective from 5th June, 2020.
Mr. Speaker, as
reiterated by H.E. The President during his State of Nation address in April this
year, our resolve to sustainably manage our natural resources remains
unwavered. Mr. Speaker, this is a
new sector in our economy. We shall soon export the crude to establish its commercial
viability. In addition, the National Intelligence Service working with
Department of Defence is conducting a geophysical survey to map out the natural
resources across the country. In order to prepare for that, we have finalized the
Kenya Sovereign Wealth Fund Bill which is undergoing legal drafting before
submission to Parliament for approval.
Mr. Speaker, among
other thingsthe SWF Bill proposes
creation of a Fund and provides a legal framework to guide the investment of
revenues from oil, gas, and mineral resources. It is important to underscore
that, other than the cost of managing the Fund, all the monies in the Fund will
be used to finance critical development programmes, build savings for future
generations in order to ensure inter-generational equity, and for stabilizing
budgetary expenditures in the event of fluctuations in the price of the natural
resources.
Mr. Speaker,
the Government has eased service delivery to the public through digitalization
of critical services in the e-citizen portal. We have e-Registry, and we are
digitalizing land transaction services, business registration, motor vehicle
and driver’s license services and services under the registration of persons,
including passports.
As
a result of the ICT penetration, Mr.
Speaker, Kenya has been ranked seventh in Africa in e-commerce uptake and
85th globally, in the United Nations Conference on Trade and Development
(UNCTAD) Business-to-Consumer E-commerce Index, 2018.
Mr. Speaker, in May 2019, H.E. The President launched
Kenya’s Digital Economy Blueprint for Africa in Kigali, Rwanda. The Blueprint
serves as one of Kenya’s contributions to SMART Africa Alliance in its role as
the champion for Digital Economy within the Alliance and proponent of an
African-wide digital economy.
Mr. Speaker, the adoption of the Digital Economy
framework offers us opportunities to leapfrog and join nations in the First
World and actively contribute to the global economy.
Development Bank
Institutions/Banks
Mr. Speaker,
the Government will continue with its initiatives to recapitalize and
restructure the banks that are partially or wholly owned by the Government with
a view to creating stronger Banks and Development Financial Institutions. In
this regard, the Government as a shareholder is supporting the merger of the National
Bank and the Kenya Commercial Bank that will result in creation of one of the
strongest Banks in East Africa.
In
addition, the merger of the Tourism Finance Corporation, IDB Capital and the Industrial
& Commercial Development Corporation (ICDC) to form the Kenya Development
Bank will the right capacity to support the industrial growth of the country by
providing long-term development financing.
Sugar Companies
Mr. Speaker,
you will recall that H.E. The President appointed a Task Force in November 2018
to review our sugar industry with a view to addressing the challenges in the
sector. The Government will implement the recommendations from the Task Force,
and in the meantime, pay all outstanding debts owned by sugarcane farmers.
Universities
Mr. Speaker,
university reforms are critical at this stage. We shall review all the
Universities’ public financial and management systems; appraise ongoing
projects with a view to restructuring them; and implement radical measures that
will include merger or closure of some universities and university campuses
that are not able to sustain their operations against the number of students
admitted or degree courses offered.
X. Conclusion
In conclusion, Mr. Speaker, the Government, under the leadership of His
Excellency President Uhuru Kenyatta, has steered our economy to become the
largest and most diverse in the region. Mr.
Speaker, we should be proud of this and be ready to guard and further
promote our growth and development.
Mr. Speaker, the budget I have presented today has undergone a vigorous
preparation process in which we had to make tough decisions in the quest to
move our country forward. Faced with limited resources we have had to make
tough choices to cut low priority expenditures. I firmly believe that if we all
embrace and support the measures spelt out in this budget, we shall create more
jobs and transform the lives of Kenyans.
Mr.
Speaker, this budget takes into
account the social-economic status of our people and their desire for better
livelihoods and quality of their lives. In summary, Mr. Speaker, this Budget:
- Responds to the concerns of Kenyans, which
include high cost of living, unemployment, poverty and income inequality;
- Lays a firm foundation for economic
transformation and renewal;
- Aligns resource allocation to the “Big Four”
Plan while sustaining allocations to critical infrastructure as well as
pro-poor spending in health, education, and social safety net programs; and
- Provides support to the youth and growth of MSMEs.
Mr. Speaker, the actualization of our development goals in the past
has largely been driven by the Kenyan spirit of peace, hard work, unity of
purpose and national cohesion. Mr.
Speaker, these values remain critical for our growth and development. I therefore,
urge all Kenyans to nurture and promote peace and unity of purpose as
fundamentals in building the Kenya we want – a prosperous and peaceful nation
in which we all aspire to live in.
At this point, Mr. Speaker, I wish to thank H.E. The President and H.E. The Deputy
President for their leadership during this Budget preparation process.
Mr. Speaker, allow me to thank you, most profoundly for according
me this opportunity to present to this august House, the Highlights for the FY
2019/20 Budget and also for the support the House has accorded the National
Treasury in the budget formulation process.
I am also
greatly indebted to my Cabinet colleagues and the Principal Secretaries for
their support and cooperation throughout the process of preparing this budget.
Many thanks to the Budget
and Appropriation Committee led by the Chairman, Hon. Kimani Ichung’wa, the Finance
and Planning Committee led by Chairman, Hon. Joseph Limo and the other
Departmental Committees of the National Assembly as well as leader of majority
Hon. Aden Duale for the time and dedication in sifting through the Estimates
and constructive debates that helped refine this Budget.
A word of
appreciation to the staff of the National Treasury and Planning led by the Principal
Secretary, Dr. Kamau Thugge, who have tirelessly worked long hours to ensure
that this budget and supporting documents meet the legal timelines.
Finally, Mr. Speaker, I wish to thank Kenyans
from all walks of life who gave their suggestions and proposals throughout the
budget making process.
Thank You
God bless you, God bless Kenya
Mr. Speaker, in April 2019, I
submitted the budget estimates together with the accompanying documents. As I
conclude, I further submit the following documents to this august House;
- Budget Statement;
- Finance Bill, 2019;
- The Competition (Amendment) Bill, 2019;
- The Insurance (Amendment) Bill, 2019;
- Various Legal Notices;
- Financial Statement for FY 2019/20;
- 2019 Budget Policy Statement;
- Estimates of Revenue Grants and Loans for FY
2019/20;
- 2019 Medium Term Debt Management Strategy;
- Budget Highlights –
The “Mwananchi” Guide, 2019/20;
- Statistical Annex
to the Budget Statement for the FY 2019/20; and
- Public Finance
Management (Biashara Kenya Fund) Regulations, 2019.
Mr. Speaker, I will
soon submit the following bills which are at advanced stages of legal drafting
to the National Assembly for approval.
- Income Tax Bill, 2019;
- Kenya Sovereign Wealth Fund Bill, 2019;
- Central Bank of Kenya Bill, 2019; and
- Kenya National Electronic Single Window
Bill, 2019.’
