[Kenya] Kimunya presents first Budget amid fears of growing poverty

from The Standard

By Benson Kathuri

Finance minister Amos Kimunya presents his first Budget on Thursday amid fears that the Government is losing the fight against poverty.

According to a survey conducted by the Institute of Economic Affairs (IEA), most Kenyans want more funds channeled to the rural areas.

"Although the year 2005 recorded a growth of 5.8 per cent, a number of economic challenges remain," said Albert Mwenda, IEA executive director.

"These include continued poverty and inequalities across different geographical locations and unemployment."

Other challenges are an expanding current account deficit mainly due to rising wages for civil servants and teachers and near-stagnation of revenues collected by the Kenya Revenue Authority (KRA). Though KRA and Treasury had agreed of an Sh309 billion revenue collection target for this financial year, the authority had collected Sh243 billion by the end of May.

There are fears that the authority might not meet the target though it will become clear whether the minister used the figure once he unveils the budget. Mwenda says though the recent drought that left over three million people in need of emergency food relief are over, food production was still very low.

This might keep prices high and undermine Government efforts to keep inflation low. The researcher fears that the General Election expected next year might also influence budgetary allocation. With political situation worsening in Somalia following renewed infighting, the Government might be forced to raise more money to cater for immigrants flocking in mainly in the arid northern Kenya.

"Regrettably on the social and political front, a population aged 15-34 and forming the majority of the total population present challenges to our development agenda," he said.

The group is mainly unemployed and therefore depend on those already working posing is a big financial burden. The perceived donor apathy that has led to reduced foreign aid inflows in the last three years worsens the situation.

Mwenda says the funds that mainly come from multilateral aid agencies led by the World Bank and the International Monetary Fund are no longer reliable.

"Kenya must find its own way of financing development and growth," says Mwenda.

"There is great potential to finance and spur development through revenues, innovative tax packages, private sector participation, creative banking and investment options as well as trade," he told the The Standard.

The Government has admitted that the revenue envelope is too thin to cater for the ever-rising demands. Senior Treasury officials maintain that pro-poor programmes will, however, continue to get top priority when allocating the funds in the next budget.