Business

Experts doubt plans to finance projects through internally generated funds

Thursday, April 29th, 2021 00:00 | By

DEVELOPMENT: Doubts have been raised over plans by the National Treasury to finance a majority of government projects in the next financial year through funds raised locally.

About 63 per cent of government projects in financial year 2021/22 are expected to be financed from domestic sources, either revenues or from money borrowed locally. 

But financial experts questioned the sustainability of this plan, saying Covid-19 has taken a heavy toll on revenue collections and there were no indications that the pandemic could end soon.

Speaking during the launch of the a Shadow Budget Report, the event organised by the Kenya Private Sector Alliance (Kepsa) and the Institute of Public Finance, the experts questioned Treasury’s sustainability plan with Covid-19 having taken a heavy toll on revenue collections.

“The general consensus is that there is a lot more we need to do,” said Eva Warigia, the Executive Director of East Africa Private Equity and Venture Capital Association.

She also questioned the lack of a national tax policy, saying ad hoc taxes and removal of tax incentives was hurting investment as investors prefer stability. 

Ordinary revenue

Treasury plans to raise Sh1.8 trillion in ordinary revenue in financial year 2021/22 where Sh1.4 trillion will remain with the national government while county governments will receive Sh370 billion as equitable share.

Warigia’s view was supported by John Nyangi, the head of research at the Institute of Public Finance Kenya, who noted that the ballooning public debt means the country will have even less to spend on its development projects.

According to the latest Central Bank of Kenya figures, Kenya’s public debt stood at Sh7.35 trillion of January this year comprising Sh3.53 trillion domestic debt and Sh3.82 trillion external debt. 

According to Nyangi the debt could hit Sh9.4 trillion by 2022, above the debt ceiling set by Parliament of Sh9 trillion. –Lewis Njoka

DEVELOPMENT: Doubts have been raised over plans by the National Treasury to finance a majority of government projects in the next financial year through funds raised locally.

About 63 per cent of government projects in financial year 2021/22 are expected to be financed from domestic sources, either revenues or from money borrowed locally. 

But financial experts questioned the sustainability of this plan, saying Covid-19 has taken a heavy toll on revenue collections and there were no indications that the pandemic could end soon.

Speaking during the launch of the a Shadow Budget Report, the event organised by the Kenya Private Sector Alliance (Kepsa) and the Institute of Public Finance, the experts questioned Treasury’s sustainability plan with Covid-19 having taken a heavy toll on revenue collections.

“The general consensus is that there is a lot more we need to do,” said Eva Warigia, the Executive Director of East Africa Private Equity and Venture Capital Association.

She also questioned the lack of a national tax policy, saying ad hoc taxes and removal of tax incentives was hurting investment as investors prefer stability. 

Ordinary revenue

Treasury plans to raise Sh1.8 trillion in ordinary revenue in financial year 2021/22 where Sh1.4 trillion will remain with the national government while county governments will receive Sh370 billion as equitable share.

Warigia’s view was supported by John Nyangi, the head of research at the Institute of Public Finance Kenya, who noted that the ballooning public debt means the country will have even less to spend on its development projects.

According to the latest Central Bank of Kenya figures, Kenya’s public debt stood at Sh7.35 trillion of January this year comprising Sh3.53 trillion domestic debt and Sh3.82 trillion external debt. 

According to Nyangi the debt could hit Sh9.4 trillion by 2022, above the debt ceiling set by Parliament of Sh9 trillion. –Lewis Njoka

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