Friday, June 13, 2008

Budget 2008

During his budget speech yesterday, wasn't it amazing to hear Finance Minister Amos Kimuya thanking the international community for intervening in the post-election crisis to save Kenya from self-destruction? After all, this is the same guy who at the time proclaimed that there was no crisis and that Koffi Annan was only here for "a cup of tea". Talk of eating crow!

Anyway, I thought there was a lot to take comfort from in the speech, primarily the introduction of taxes on MPs allowances. While not going as far as I would have liked (i.e. taxing their bloated salaries as well), it is a good first step and opens the door to further taxation in the future as the reluctant foot-thumping and embarrased laughter from the legislators illustrated. The zero-rating of VAT on bread and rice was also welcome (though the latter's price on the world market has been steadily declining) as was his resisting the temptation to up the rate of VAT.

I applaud his attempt to crack the whip on renegade stockbrokers through a ten-fold increase in the paid up capital requirement. Also welcome is his doubling of the road infrastructure budget as well as his proposal to establish a Contractor's Registration Board with powers to deregister and blacklist the so-called cowboy contractors.

There was, though, also a lot I found puzzling such as the Kshs. 210 million he set aside for a constituency-based national football competition. Who will administer this cash? The very MPs whose record on CDF is less than stellar? Also, his silence on the sky-rocketing cost of fuel was surprising considering that half the pump price consists of government levies. How he hopes to tame the runaway inflation without a reduction in these is something of a mystery.

Finally, it did not escape notice that the budget is heavy on recurrent expenditure and comparatively light on development and investment. I think the ratio is in the range of 3:1 in favour of recurrent expenditure. I think we urgently need to find a way of reducing the public sector bill (a theme totally absent from the speech) if we are ever going to achieve the goal of becoming a middle-income country by 2030.

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