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Inside Kenya’s Sh 3.02 trillion 2019/ 20 budget2 minutes read

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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Ethiopian Prime Minster confirms funding from World Bank

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Prime Minister Abiy Ahmed has confirmed that Ethiopia will receive $3 billion from the World Bank to help strengthen reforms in his country. The International Monetary Fund states that it has reached a preliminary agreement for a three-year $2.9 billion financing package to support Ethiopia’s economic reforms.

Abiy did not give more details on the World Bank funding. He wrote on his Twitter account that unnamed development partners have pledged more than $3 billion in addition to the World Bank and IMF funding. The money will go towards macroeconomic, structural and sectoral reforms. Abiy adds that both Governments’ and donors’ partnership is a step to transform Ethiopia into a prosperous and peaceful nation.

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First Quantum Minerals Launches Arbitration Against Zambian State Miner

Proceedings follow a criminal complaint made by ZCCM-IH against alleged unauthorized transfer of money

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First Quantum begins arbitration proceedings against Zambian State Miner
First Quantum begins arbitration proceedings against Zambian State Miner

First Quantum Minerals has begun arbitration proceedings against Zambian state miner ZCCM-IH to try to resolve a dispute. The dispute is over a money transfer to the parent company of Kansanshi Mining. The parent company is majority-owned by First Quantum Minerals, a Toronto-listed group.

The arbitration proceedings follow a criminal complaint made by state-owned ZCCM-IH against the alleged unauthorized transfer of money by Kansanshi Mining to First Quantum’s local subsidiary.

The state miner had launched action in October 2016 to sue First Quantum for $1.4 billion over claims that the Canadian company borrowed $2.3 billion from its Zambian copper mining subsidiary Kansanshi Mining Plc without informing ZCCM-IH, a minority shareholder.

The transfer in the latest case was made between Kansanshi Mining and Kansanshi Holdings. The Holding company is the Zambian registered vehicle through which First Quantum Minerals owns its majority stake. Kansanshi Mining is 80% owned by First Quantum and 20% owned by ZCCM-IH. 

Arbitration is expected to take place in London.

The Canadian miner has been embroiled in a dispute with the Zambian government after being handed a $5.8 billion bill for unpaid import duties last year.

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EAC intra-trade to grow by implementing joint policies

Work permit restrictions have been relaxed and professionals and companies are able to expand across the regional bloc

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EAC intra-trade to grow by implementing joint policies
Photo credit: Twitter / CCCC

Intra-trade between partner states of the East African Community is projected to grow between five to eight per cent annually if the countries fully implement joint policies and regulations, exploit individual competitive edge, and eliminate non-trade barriers.

While speaking at the bloc’s 20th anniversary, the chairman of the East African Business Council, Nicholas Nesbitt, said East Africans, especially private sector players, need to reflect on how far they have lived up to the ethos of regional integration.

Nesbitt said; “the private sector should be a key partner in the integration process, providing the agenda for economic and social integration. Most importantly, the region should look to becoming a single trading bloc.”

He added that both the partner states and private sector should accelerate the domestication and implementation of harmonised policies.

The EABC chairman further commended the progress made so far in the cross-border trades and easy migration, stating that it is now easier to access cross border markets.

However, he said intra-EAC trade volumes have not reached the desired levels, at just 12 per cent.

Nesbitt said the EAC is yet to exploit the power of numbers to create more jobs and income opportunities that will improve the purchasing power of citizens, thereby spurring further economic growth.

He recommended value chain collaboration between manufacturers to exploit each country’s competitive advantage.

Work permit restrictions have been relaxed and professionals and companies are able to expand and establish their customer base across the regional bloc.

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