EDITORIAL: Post-Covid recovery plan in budget good

The thrust of this year’s budget is economic recovery. It is a balance between social support, including health and capital development, and “Big Four” agenda projects. Coming against the backdrop of a global recession occasioned by Covid-19, the National Treasury sought to inject more cash into the economy to trigger consumption and enhance business.

But Cabinet Secretary Ukur Yatani did not have blinkers: Recovery will be slow and painful. Kenyans must brace for tough times. The economy had been projected to grow at 5.4 per cent this year but, at best, new projections show a 2.5 per cent growth. Which would still be better than in other parts of the world, where trends point at negative rates. The advanced economies of Europe and America are projected to contract by six per cent and go to the negative, fatally wounded by the pandemic.

Largely, the budgetary proposals are big on infrastructure and social-sector investments. Emphasis is on increasing liquidity in the market, cushioning the poor, enhancing security and facilitating business growth. But that comes against low tax collections this year. Tax relief announced by President Uhuru Kenyatta a few months ago, such as a reduction of value added tax and Pay As You Earn, have had the impact of diminishing revenues.

Several economic packages have been rolled out, targeting sectors such as tourism, transport and agriculture. The tourism and transport sectors have been grounded due to the government’s containment measures to curb the coronavirus. Hotels and restaurants have been shut following lockdown and cancelled travel.

The closure of industries and reduced productivity among the operating firms have translated to huge revenue losses. Companies have laid off staff, cut salaries or sent workers on unpaid leave. Covid-19 has thrown millions of citizens into misery and piled the number of those seeking subsidies. Some of the subventions included cash transfers to the elderly, women, youth and orphans.

On this, however, the government needs to rethink the cash-transfer models and seal loopholes through which the money gets siphoned out to the chagrin of vulnerable groups.

To spur economic growth, the Treasury has allocated tidy sums to infrastructure. Some Sh172 billion has been set aside for road construction and expansion of the standard gauge railway from Nairobi to Naivasha. Also in the package is cash for the Lamu Port-South Sudan-Ethiopia Transport (Lapsset) corridor, a project conceived by the Mwai Kibaki administration but has stagnated.

Education is the greatest beneficiary, chalking up Sh497.7 billion that included Sh59.4 billion for subsidised secondary education, Sh12.4 billion for free primary education and Sh2 billion to hire 5,000 teachers. The government had allocated funds for hiring 10,000 interns to ease the teacher shortage. Education is among the sectors hit hard by Covid-19. Schools were closed in  March and reopening them requires huge investment in terms of infrastructure, teachers and technology.

Security got Sh167.9 billion and healthcare Sh111.7 billion, of which Sh50 billion targets universal health coverage.

But the biggest challenge remains managing the country’s soaring debts. Out of the total budget of Sh2.79 trillion this year, the government will only raise Sh1.8 trillion, leaving a deficit of Sh840.6 billion to be plugged through borrowing. Yet, to date, the aggregate debt portfolio is Sh6.4 trillion — which is more than double the annual budget.

Rightly, as Mr Yatani articulated, the country must deal with the debt crisis. In the short term, he proposed an audit of capital projects being funded by borrowed funds to determine their viability and, in particular, stop stalled ones and renegotiate with donors to redirect the funds to those that are promising.

Alongside that, the minister proposed structural reforms of institutions, improving business processes and expediting service delivery. Core in this turnaround plan is easing government procurement processes by shifting to better and advanced technological platforms, changing the contracting framework for government infrastructure projects to give room for start-ups, especially those run by the youth so as to create jobs, clear all pending bills and change pension programmes.

In all these, the Treasury must tighten financial management. Loopholes for corruption and wastefulness must be sealed.

We take note that the budgets for investigative authorities have been upped; therefore, they have to intensify the campaign against graft and rein in perpetrators of the vice.