Kenya Budget 2021/22: Key Highlights

National Treasury Cabinet Secretary Ukur Yatani on Thursday, June 10, 2021 presented the 2021/22 financial year budget estimates before Parliament with Kenyans hard hit by the Covid-19 pandemic expecting some relief measures. 

The Ksh3.66 trillion budget, the highest in Kenya’s history represents about a 9% increase from last year’s Ksh3.36 trillion. 

This coming at a time when the International Monetary Fund - that in April approved a $2.4 billion (Sh256.3 billion) loan to Kenya in a three-year financing arrangement - revised Kenya’s 2021 economic growth projection downwards to 6.3% from the earlier 7.6% projection.

Financing the Budget 

To fund this mega budget, the Treasury has proposed a mix of debt, taxes and Appropriations in Aids (AiA), revenues collected directly by government agencies as well as donor grants/loans.

On loans, Yatani has set an arduous target of collecting Ksh2.03 trillion in total revenues, up by Ksh210 billion as compared to the 2020/21 financial year. This is despite the taxman - Kenya Revenue Authority (KRA) missing tax collection targets over the last few quarters.

The CS urged Kenyans to pay their taxes freely noting that through the KRA iTax system they have identified, among others - perennial non-compliant taxpayers; defaulters; payment returns without payment; nonfilers; nil filers; credit filers; stop filers and decliners - as some of the ways Kenyans are using to evade the payment of their tax liabilities. 

However, with total government spending exceeding total revenue collection, there exists a Ksh1.6 billion budget hole that has to be filled through, among others, borrowing even as the national debt inches closer to the ceiling set by Parliament. 

Credit rating firm Moody says Kenya’s debt burden could rise to 72.6% of GDP by 2023 as it affirmed Kenya’s credit rating at B2 - maintaining a negative outlook. 

Moodys says this projection is concerning and could potentially lead to financing risks unless the country meets the ambitious fiscal consolidation targets that are part of the IMF Program. 

Kenya’s debt has continued to grow by almost Ksh1 trillion every year for the last 6 years now, having crossed the Ksh7 trillion mark in 2020, as compared to Ksh5.81 trillion in 2019, Ksh5.04 trillion in 2018 and Ksh4.41 trillion in 2017.  

Allocations

The Executive has been allocated Ksh1.89 trillion - a 1% increase from the Ksh1.92 trillion currently. 

Parliament has received a budgetary allocation of Ksh37.9 billion up from Ksh37.3 billion.

The Judiciary, the third arm of government that has over the last few budgets complained of being crippled by budget cuts, received a marginal increase in budgetary allocation to Ksh17.9 billion from 17.7 billion. 

County governments expected to share out Ksh370 billion.

Nairobi Metropolitan services has been allocated Ksh27.2 billion which will comprise Ksh18 billion for recurrent expenditure and Ksh9.2 billion for development expenditure. 

The Treasury proposes the allocation of Ksh1.29 trillion for recurrent expenditure and Ksh669.6 for development expenditure. 

Total expenditures for the 2021/22 financial year are projected to be at Ksh3.03 trillion (24.5% of GDP) as compared to Ksh2.89 trillion (25.8% of GDP) for the 2020/21 financial year. 

Taxation

With the ambitious tax revenue targets set by the Treasury in Yatani’s second budget, the following tax measures are proposed;

1. Imports of vegetable products to attract 30%  duty rate for the next one year
2. Excise duty on nicotine products at Ksh5 per gram
3. Digital Service Tax: Income tax expanded to include internet and electronic products.
4. Amendments of custom duty to raise Ksh8.7 billion to the exchequer.
5. Reintroduction of excise duty on betting at the rate of 20% of the amount wagered
6. Solar power generation equipment exempted from VAT
7. VAT exemption for laboratory reagents and lab equipment
8. Sanitisers, ventilators, masks duty free for the next one year
9. Imports used in manufacture of ventilators VAT exempted
10. Removal of excise duty on locally assembled motor vehicles, duty-free importation of Completely Knocked Down kits and reduced corporate tax from 30 to 15% for the first five years of operation.

More Highlights By Ministry

Health

‍Ksh121.1 billion allocation; Ksh47.7 billion for Universal Health Coverage (UHC), Ksh8.7 billion for Covid-19 Emergency Response, Ksh4.1 billion for maternity health care. 

Additionally, Ksh1.8 billion is allocated to elderly and vulnerable persons, Ksh3.9 billion for immunisation and vaccination programmes and Ksh14.3 billion for procurement of Covid-19 vaccines.

Kenyatta National Hospital (KNH) was allocated Ksh15.2 billion and the Moi Teaching and Referral hospital Ksh11.5 billion.

Defence

‍Ksh294.5 billion allocated to the Defence, National Police and the National Intelligence Service. 

To support the National Communication and Surveillance System, Ksh1.5 billion has been set aside. 

Transport

‍Ksh182.5 billion allocated; Ksh700 million to actualise the Nairobi Bus Rapid Transport System, Ksh7.2 billion for the construction of the second phase of the Standard Gauge Railway (Nairobi - Naivasha) while Ksh7.5 billion has been allocated for the Lapsset project. 

The Nairobi Metropolitan Services (NMS) has been allocated Ksh100 million for infrastructure projects and a further Ksh11.2 million for the construction of footbridges. 

Education

‍Ksh202.8 billion allocation to support programmes with more additions 

• Ksh62.2 billion for free day and secondary education
• Ksh4 billion for KCSE and KCPE examination fee waivers
• Ksh4.2 billion for primary and secondary school infrastructure.
• Ksh1.8 billion for the school feeding programme
• Teachers Service Commission (TSC) Ksh281.7 billion
• Ksh1 billion for the competence-based curriculum
• Ksh420 million for the digital literacy programme and integration of ICTs in secondary schools

• Ksh 76.3 billion for University Education; 
• Ksh 15.8 billion to the Higher Education Loans Board; 
• Ksh 5.8 billion for Kenya Secondary Education Quality Improvement Project; 
• Ksh 5.2 billion capitation for TVET students
• Ksh323 million for National Research Fund.

Agriculture

‍Ksh60 billion covering food security and its development programme.

• Ksh1.5 billion for the agricultural sector development programme 
• Ksh1 billion for the construction of a fish processing plant in Lamu‍

Other Priority Areas

• Economic stimulus programme (including Kazi Mtaani): Ksh23 billion
• Easing cash crunch for SMEs: Ksh1.9 billion
• Big 4 Agenda (Health, Food Security, Affordable Housing and Manufacturing) - Ksh142.1 billion
• Dongo Kundu special economic zone and Kenane and Athir River industrial Parks - Ksh8.3 billion
• Health interns recruitment - Ksh1.2 billion
• Kenya Wildlife Services community scouts engagement programme - Ksh1 billion

Pending Bills

CS Yatani also directed all government ministries, departments and agencies and county governments to clear all pending bills by June 30, 2021. 

“Delays in payment of pending bills to businesses who provide services to both National and County Governments has affected liquidity and operations of these entities. 

“In a number of cases, this has led to closure of businesses and affected the livelihoods of the suppliers. Though progress was made in settlement of these bills by the National Government, we still have challenges with the County Governments that still owe various suppliers huge amounts,” he said.

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