What you need to know:
- The crisis is now reflected in the cuts that have appeared in the new supplementary budget that has reduced the overall national budget by Sh74.3 billion.
- The president directed the ministries of Health and Public Service to develop a welfare package to cushion health workers on the frontline.
As the number of those infected with Covid-19 rose to 234, the National Treasury has now set aside Sh2.66 billion for the Ministry of Health coronavirus response for the next two months — as tough budget cuts sliced expenses in virtually all sectors.
In a bid to address the coronavirus pandemic, Treasury also increased the recurrent expenditure — salaries and operations — for Moi Teaching and Referral Hospital by Sh635 million, while Kemri gets an extra Sh142 million.
The government has also released an additional Sh8.5 billion to the elderly and poor under the cash transfer programmes run by the Labour ministry.
The additional Sh500million, which was in arrears, has also been released to people with disabilities. “These monies will be devoted specifically to cushion the most vulnerable and to protect our healthcare workers,” President Uhuru Kenyatta said Thursday.
This comes as the government is struggling to balance the budget, in an economy disrupted by the Covid-19 crisis.
The president revealed that the government had identified needy households in Nairobi who will receive the weekly Covid-19 stipend.
He said the piloting of the project started on Wednesday this week and some of the initial beneficiaries have already received the funds.
The crisis is now reflected in the cuts that have appeared in the new supplementary budget that has reduced the overall national budget by Sh74.3 billion.
This was achieved by reducing the development budget by Sh98.7 billion and increasing the recurrent budget by Sh24.3 billion.
The budget cuts come as Kenya is battling the novel disease, which has forced global economies into a spin.
In the new supplementary budget, a new vote-head for Covid-19 response has been created.
Previously, the Ministry of Health had a budget of Sh111.5 billion for the 2019/20 financial year.
From this budget, Sh62.9 billion was set aside for recurrent expenditure, which includes salaries and operations, while the remaining Sh52.7 billion was allocated for capital expenditure, which is also known as development budget.
The new supplementary budget has now rationalised this spending with a decrease of Sh340.2 million and Sh11.9 billion in recurrent and capital expenditures, respectively.
“The decrease in capital expenditure is mainly due to rationalisation of the budget," the document reads in part.
Treasury says that to address the disease, the Health ministry has been funded with Sh3.9 billion, which comprises Sh1 billion for recruitment of health workers, Sh300 million for operations and Sh2.6 billion under development.
The president further directed the ministries of Health and Public Service to develop a welfare package to cushion health workers on the frontline.
The package would entail insurance to cover hospital staff. Mr Kenyatta said the package would deal with the health, mental and emotional needs of frontline doctors, nurses and other medics.
He also gave county governments a three-month waiver to the Kenya Medical Supplies Agency (Kemsa) to allow them purchase masks and personal protective equipment made locally.
He also said the national government will also support devolved units in the response to the crisis with an additional Sh5 billion to supplement their savings from the Kemsa waiver.
He said so far, the Covid-19 emergency response fund has received almost Sh1 billion.
The World Bank and the International Monetary Fund (IMF) are among global lenders that have committed funding to countries, including Kenya, to help fight the pandemic.
The World Bank has already given Kenya Sh5.3 billion in immediate funding to support its response to the pandemic. Denmark has also boosted Kenya’s fight with a Sh320 million funding.
Recently, President Kenyatta announced various tax measures, among them reduction in Value Added Tax (VAT) from 16 per cent to 14 per cent.
These are likely to reduce the tax collections from the Kenya Revenue Authority (KRA). Treasury estimates that it will have a cash shortfall of at least Sh172 billion due to the tax cuts alone.
President Kenyatta also scrapped Pay As You Earn (Paye) taxes for those earning less than Sh24,000 and reduced the tax for top earners from 30 per cent to 25 per cent.
Overall, the government has cut all the programme budgets by 3.7 per cent as the coffers start to feel the impact of a sluggish economy.
In order to address the crisis, Kenya has also established the Covid-19 Emergency Response Fund chaired by Kenya Breweries boss Jane Karuku to raise funds from corporates and other donors to boost its financial muscle to fight the pandemic.
But as expected, not all savings from travel, training and wage bill expenses are being channelled directly to the Health ministry, which is at the forefront in this battle, highlighting the tricky balance that the Treasury is facing.
The IMF projects that the virus will hurt Kenya’s economy more than the 2007/2008 post-election violence did. It says the economy will grow by one per cent due to the impact of the virus.
The other beneficiary of Treasury Cabinet Secretary Ukur Yatani’s second supplementary budget is the presidency, which was allocated more money to run the city of Nairobi.
The total budget of the presidency has risen by Sh4 billion to Sh15.7 billion. This comprises Sh12.3 billion for recurrent expenditure and Sh3.4 billion for capital expenditure. Initially the presidency had been allocated Sh11.7 billion.
Treasury explains that the increase was mainly on account of the transferred functions from Nairobi City County Government to Nairobi Metropolitan Services (NMS).
The new budget shows that Sh2.2 billion will go to the newly formed NMS, which has been tasked to fix Nairobi. Its main functions are health, sanitation, water and provision of efficient transport services, which are part of the county budgets.
The allocation comes as Nairobi Governor Mike Sonko is embroiled in a tag of war with the national government over the transfer of Sh15 billion to the NMS.
NMS was expected to draw its resources from the Nairobi City County account, but it has received a big shot in the arm from this allocation tucked in the presidency budget.
The NMS allocation helped push recurrent budget for the presidency from Sh9.4 billion to the amended Sh12.2 billion.
Also, the office of the former prime minister has been allocated Sh71.7 million — the first time in the budget.
Its temporary employees have been allocated Sh10 million, while Sh20 million has been set aside as insurance costs, Sh26 million for vehicles, Sh1.5 million as fuel while an additional Sh4.2 million will go towards routine maintenance of vehicles and transport equipment.
Office of First Lady Margaret Kenyatta has lost Sh12 million while the office of the Deputy President’s spouse has lost Sh15.7 million. The Deputy President’s office has lost Sh32 million.
Recently, President Kenyatta announced pay cuts of 80 per cent for himself and his deputy, 30 per cent for the chief administrative secretaries (CAS) and 20 per cent cuts for principal secretaries.
In the new supplementary budget, the expenditure for State House Nairobi has been retained at Sh578 million while the State Lodges and State House Mombasa have lost Sh134 million.
The recurrent budget for the presidency pays for salaries and expenses incurred in general administration and planning, the executive office of the President, deputy president, Cabinet Affairs Office and the Presidential Strategic Communication Unit.
Additional report by Verah Okeyo