Budget boosts welfare, hits luxury items

The government has proposed to boost spending on welfare and education as it juggled between economic revival and appeasing households increasingly restless about the runaway cost of living.

The Sh3.3 trillion budget for the financial year 2022/23 tabled yesterday by National Treasury Cabinet Secretary Ukur Yatani in Parliament shows boosted spending on welfare programmes such as cash transfers to vulnerable groups and Universal Health Care (UHC) — an indication of a deliberate effort aimed at reducing social inequality and shifting to a more sustainable economy after the pandemic.

“We have outlined policies in this budget that are geared towards returning the economy on a more sustainable growth path for improved livelihoods,” said Treasury Cabinet Secretary Ukur Yatani. The state proposed Sh62.3 billion for the realisation of the UHC that has already been piloted in four of the 47 counties and Sh2.1 billion to employ hundreds of thousands of youths for another phase of the Kazi Mtaani programme.

The Sh62.3 billion allocated for health programmes includes Sh7 billion for the purchase of Covid-19 vaccines and related spending, Sh4.1 billion for free maternity, Sh5.2 billion for the managed equipment services (MES), and Sh1.8 billion for healthcare package for the elderly.

“Better health outcomes depend on the availability, accessibility, and capacity of health workers to deliver quality services anchored on well-equipped and provisioned healthcare facilities,” Mr Yatani said.

Vulnerable groups

The state has also prioritised vulnerable groups with a bumper Sh39.5 billion allocation to social protection programmes aimed at cushioning vulnerable members of society from poor living conditions.

Of this amount, Sh17.5 billion will go to elderly persons, Sh7.9 billion to orphans and vulnerable children, Sh1.2 billion to persons living with disabilities, and Sh5.1 billion for the hunger safety net programme.

“Unleashing the productive potential of people living in poverty involves the removal of constraints through economic inclusion programme,” said Mr Yatani.

It also proposes going big in education spending, with the budget’s single largest allocation of Sh544.4 billion to support key programs in the sector.

Free primary education

This includes Sh12 billion to cater for free primary education, Sh64.4 billion for free day secondary education, and a Sh5 billion examinations waiver for Grade Six, Class Eight, and Form Four candidates.

The allocation also caters for a Sh294.7 billion boost to the Teachers Service Commission (TSC), Sh91.2 billion for university education, and Sh15.8 billion to the Higher Education Loans Board (Held).

Analysts said Mr Yatani’s expenditure plans point to an attempt to improve the overall welfare of Kenyans.

“Based on the budget statement, the government seeks to improve the welfare of Kenyans through economic and structural reforms. To achieve this, the government intends to focus on enhancing the security of its citizens, increase investment in infrastructure, transform key economic sectors such as agriculture and expand access to quality education, healthcare among other stimulus economic packages,” Mr Solomon Kihanga, a tax manager with KPMG Advisory Services Limited, said.

Luxury items

To balance the economic equation, the state, however, went for luxury items to raise additional revenue totalling Sh50.4 billion to finance its budget.

The government is set to reap big from radio, television stations, newspapers, and other advertisers of gaming, gambling, and alcoholic drinks to raise new revenue from the growing industry.

Mr Yatani has slapped a 15 per cent excise duty on all fees charged by advertisers, which will see them raise their rates and eventually lead to a higher cost of alcohol and gambling.

“Gambling, gaming, and alcohol addiction have become prevalent in our society. These habits are extremely addictive and can result in a variety of harmful repercussions, especially for the youth. Advertisements for alcoholic beverages, betting, and gaming contributes greatly to the promotion of these habits,” he said.

The CS has also slapped a 10 per cent extra excise duty on excisable products except for fuel. Treasury expects to increase excise duty collection for financial year 2022/23 to Sh297 billion from Sh260 billion, driven by increased consumption and the new tax measures.

Challenges facing citizens

Mr Nikhil Hira, a tax expert at Kody Africa, however, said Mr Yatani’s budget does not address many of the challenges facing citizens, adding that the many tax incentives especially in the manufacturing sector do not necessarily have trickle-down benefits to consumers.

To prop the economy, the state proposed to roll out a third economic stimulus package of Sh30.1 billion to stimulate economic growth and enhance the employment of thousands of people in various job markets.

Despite the pro-poor measures, Mr Yatani’s budget has a gap of more than Sh800 billion, which could mean more debt pain if the state fails in its promise to tighten spending and step up efforts to collect more tax as it seeks to bring ballooning state debt under control.

Budget deficit

The budget deficit is projected to drop to 6.2 per cent of gross domestic product (GDP) in the year through June 2023.

This compares with an estimated deficit of 8.1 percent of GDP this year. Mr Yatani plans to finance the Sh862.5 billion gap by raising Sh581.7 billion domestically and Sh280.7 billion shillings offshore.

The budget comes on the back of total projected revenue collection amounting to Sh2.4 trillion, including Sh2.1 trillion in ordinary revenue, a growth from Sh1.8 trillion expected to be collected at the close of the current financial year.