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The first national root of budget shadows for a predictable tariff government – KBC

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The Shadow National Budget published by the public affairs and policy analysis has called for the rapid adoption of a predictable tax regime to boost economic growth and reduce the coming external debt situation.

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The Shadow Budget, dubbed the “Revitalization Road” and released by the Public Finance Institute – Kenya in collaboration with Oxygène Marketing Communications prior to the June national budget reading, highlights the importance of rapid economic recovery and management strategies. of money to avoid financial crisis.

Shadow Budget 2021 proposes to freeze all new projects during the recovery year when it resumes debt repayment to provide more funding to finance development and recurrent expenditure.

Research notes confirm that the National Debt repayment rate (General and interest) is expected to reach Ksh. 1.023 trillion at the end of FY 2021/22, representing 60 percent of the tax collected.

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Speaking at the launch of the Shadow Budget, the Institute of Public Finance – Chief Executive Officer of Kenya Mr James Muraguri said the country had violated all three levels of public debt sustainability for total debt and two out of four external debtors.

Such violations, he said, put the country on a path of recklessness that necessitates the adoption of recovery plans and calls for the immediate implementation of effective debt management policies led by the independent directorate of debt management.

Oxygène Marketing Head of Communications Ms. Magdalene Kariuki said: “Through the analysis presented in the Shadow Budget, it was hoped that a more careful approach would be taken in the engagement between government and non-government actors in joint review and debate on national policy. of money. ”

The shortfall in the state budget, the Shadow Budget note, is due to high spending pressure and declining GDP levels has been a major factor in the growth of public debt, while the government continues to borrow to finance deficit. . The Shadow Budget Report recommends that the government should publish a comprehensive review of proposed tax measures in order to maintain a predictable tax environment.

“Kenya’s Shadow 2021/22 Budget is the first and is prepared against the backdrop of declining participation between government and non-government actors in the budget process, reducing access to budget information especially on public debt contracts and payment of services and public procurement of goods and services, ”Muraguri said.

He further added that: “The International Monetary Fund (IMF) has reduced Kenya’s carrying capacity from medium to high levels to signal significant liquidity risks as the government spends large part of the country’s tariffs on debt repayment at the expense of key deliveries. services such as health care, education, electricity, agriculture, money transfer for people with disabilities, the elderly. Tax ratios and GDP have been declining in recent years, meaning Kenya is increasingly dependent on debt. “

The Shadow Budget Report shows that the actual cash deficit, in addition to grants, has averaged 8.0% in FY 2016/17 to FY 2019/20 compared to the target of 7.0% in the same period.

This, Muraguri said, indicates the inability of the National Treasury to predict future revenue and deficit, implying that decisions in the general budget are not entirely guided by reality but rather by the need to demonstrate a sound budget position.

Considering the negative impact of Covid 19, Shadow Budget notes that the National Treasury for the collection of recurrent revenue of KSh. 1.78 trillion in FY2021 / 22, which is large compared to Ksh. The 1.57 trillion collected in FY 2019/20 and the 1.59 trillion expected in FY2020 / 21 are very fond of.

The historical trend of pre-COVID-19 shows shortcomings in how the government sets its estimates and collects these revenues while also showing a reduction in the ratio of tariffs to GDP.

While noting that the proposed revenue target set for FY 2021/22 is 10% higher than last year and appears to be unrealistic given the historical performance of the medium term, the Shadow Budget report suggests that more appropriate revenue estimates are needed.

It recommends a report: “The government should maintain its revenue estimate of KSH 1.8 trillion as per the revised FY2020 / 21 billion budget. In addition, there should be a revenue adjustment in the most efficient way to estimate revenue to avoid further financial deficits. ”

The performance budget is set to increase by 145 billion or 5% to 3 trillion in FY2021 / 22 compared to 2.85 trillion in FY 2020/21 during an increase in debt repayment and a decrease in revenue performance. This could lead to a further increase in financial equity and a further accumulation of public debt shares.

The portion for the county in FY2021 / 22 is projected to increase by KSH.370 billion after a staggering of 316.5 billion in 2019/20 and 2020/21.

Ms Kariuki noted the potential influence that political environment change was in making such decisions compared to the impact it would have on the average taxpayer.

The National Treasury proposes to sign a deficit of KSH 36 billion to KSH 930 billion in 2021/22 compared to KSH 966 billion in 2020/21 funded up to 70% from internal sources and the remainder from external sources.

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