Kenya’s debt has remained sustainable, but with elevated risks of debt distress due to persistent global shocks that adversely affect the liquidity ratios. The depreciation of Kenya shilling against major currencies and the rise of interest rates have elevated the cost of debt service.
Further, the depreciation of the currency has increased the size of the public debt stock as half of the public debt is denominated in foreign currency. Although the debt burden has risen, The government has stood its ground by expressing its commitment to honoring all public debt.
The fiscal deficit will be financed through a net external financing of 131.50 Billion shillings and net domestic financing of 586.5 Billion shillings. The fiscal consolidation plan targets to gradually reduce the fiscal deficit including granting from 6.2% of GDP in the financial year 2021/22 to 5.8% of GDP in the financial year 2022/23 and 4.4% of GDP in 2023/24 and further reducing the fiscal gap to 3.6% in the Financial Year 2025/26. In concurrence with reducing the budget deficit, the economy is expected to rebound and expand by 5.5% in 2023 up from 4.8% in 2022. This estimate will be supported by private sector-led growth including strong performance of the services sector.
The budget
The three arms of the government: the Executive, Parliament, and Judiciary will be allocated some funds for recurrent and development expenditures in this year’s Fiscal Bill. The Executive will receive a bulk of Ksh 2.16 trillion. Parliament, National Assembly, and Senate will receive a total of Ksh 40.4 Billion while the Judiciary was allocated Ksh 22.99 Billion. The 47 counties are set to receive an equitable share of Ksh 385.4 Billion as revenue. Additionally, Consolidated Fund services were allocated Ksh 1.836 trillion plunging the spending in the next financial year to 4.45 trillion.
In the budget, Ndung’u inflicted more pain on salaried taxpayers by raiding their pockets to finance the Ksh 3.68 trillion budget promising to revive Kenya’s economic fortunes through painful tax measures. Salaried workers will surrender nearly 40 percent of their salary to the government in the form of a 35 percent income tax for top earners, a 1.5 percent housing levy, and 2.7 percent National Health Insurance fund deductions.
Budget winners and losers
Just like any other budget we have had in the country, there were winners and losers in this year’s budget.
Winners
Loser
Moreover, The IMF and World Bank’s glaring blueprint in the budget could not go without notice. The government expressed its interest in restructuring KPLC and Kenya Airways with the aim of improving their efficiencies and enhancing their financial sustainability as advised by the IMF.
For KPLC, the government will restructure the balance sheet by shifting its focus to the huge loan balances, payables, and receivables in a bid to reduce the huge liquidity gap. As for Kenya Airways, Kenya’s National Treasury will not be providing capital injection for the troubled airline in the 2023/24 financial quarter as expressed in the Finance Act
Game theory at play in Parliament
The Finance Bill received a great drawback from the opposition citing that its main aim was to oppress Kenyans. The opposition vowed to shoot the finance Bill down in parliament, however, this was not the case in parliament. Some of the Members of parliament were missing in action on the day of voting while 28 members in the opposition voted in favor of the Finance Bill. The National Assembly passed the Finance Bill, in the second reading stage. 176 members voted in favor while 81 members opposed the Bill.
The passing of the Finance Bill
The journey towards implementation of the Finance Bill has been one rocky ride. From the contentious debates, demonstration threats to it being challenged in court several times.
In fact, barely a week after the President signed the Finance Bill into law, the High Court suspended the Finance Act’s implementation from taking effect for a week. This follows a petition tabled by Busia Senator, Okiya Omtata and other human rights activists, challenging the constitutionality of the Fiscal Bill.
According to Okiya Omtatah, the appropriation Bill of 2023 flouts Article 220(1) of the Constitution to the extent that it represents expenditure estimates with no corresponding revenue estimates. Omtatah’s plea is that Kenyans get granular revenue estimates in a similar manner as we do have expenditure estimates.
Additionally, Omtatah alleges that the Finance Act of 2023 did not get input from the Senate, which violates Article 110(3) of the Constitution; the Finance Bill was introduced in National Assembly without first determining whether it concerned county governments.
Lady Justice Mugure Thande ruled in Omtatah’s favor, suspending the law from taking effect from July 1, 2023. The state was directed to file a response by Tuesday, July 4th.
The author is a student at Strathmore University and an intern in this publication.
