Kenya Budget attacks the rising cost of living

By Daily Nation

Finance minister Uhuru Kenyatta on Wednesday spelt out an ambitious Budget aimed at the basic level — putting food on the table for all Kenyans and offering the most specific assault on the rising cost of living.

The minister allocated a cumulative Sh100 billion to promote agriculture to enhance food security, which will stem the spiralling food prices caused by production shortfalls.

Also, duty on maize, wheat and rice was cut to increase local supply and reduce prices.

High food prices have been a major concern and the government is acting to avert food riots that have been witnessed in other countries like Uganda, especially going into an election year where emotions can easily be whipped up by politicians looking for votes.

Fuel price and drought

“We all know the tough times we are facing following the new challenges stemming from rising international commodity prices, including fuel and drought-related concerns on food security,” Mr Kenyatta said in the Budget ministerial statement read in Parliament on Wednesday.

“The resilience we have demonstrated in the past will have to come handy again, but most important now is cushioning our people against these challenges.

“We have to take drastic measures to reduce, on a sustainable basis, the cost of living and assure our people of food security and employment going forward.”

He extended Common External Tariff (CET) application to allow the importation of rice at the rate of 35 per cent instead of 75 per cent for one year to boost local supply of the staple food.

And to enable millers import wheat to supplement local production, he allowed duty-free importation, down from the 10 per cent duty granted in the last financial year.

Also, he gave a duty waiver for six months on maize imports instead of 50 per cent applied for the region.

The minister removed excise duty on kerosene, barely two months after cutting it by 30 per cent to stem the impact of rising fuel prices on households.

Measures to boost food supply include the biggest investment ever in irrigation to rehabilitate huge chunks of semi-arid land across the country into arable land.

Irrigation, livestock and other activities geared to enhancing food security and water harvesting got Sh11.5 billion.

This will go into financing water harvesting at Sh2.1 billion as well as storage for domestic, animal and irrigation, livestock production and domestic consumption.

The Budget also takes care of livestock farmers by establishing a Sh400 million Livestock Fund and providing Sh492 million for additional slaughter houses in arid areas.

The irrigation programme, started under the Economic Stimulus package, has been greatly expanded to cover the 1.7 million acres with irrigation potential to transform the country into a food surplus producer.

The total revenue target for fiscal year 2011/12 is Sh787.6 billion – or 24.7 per cent of GDP, based on projected economic growth, the on-going reforms in tax and customs administration, and new tax measures, including fee collected by public universities which was previously not captured in the budget.

Recurrent expenditure for the year is Sh754.4 billion, development expenditure is Sh398.6 billion, while consolidated services will take Sh209.5 billion.

The minister said he would finance development expenditure amounting to Sh262.5 billion from the Exchequer.
 He said he received commitments amounting to Sh41.1 billion to finance development projects from external grants.

Total expenditure will amount to Sh1,066.8 billion giving an overall deficit of Sh236.2 billion, or 7.4 per cent of GDP.

But Mr Kenyatta said this would be financed by net foreign financing of Sh116.7 billion and Sh119.5 billion borrowing from domestic market.

“This means the fiscal framework for 2011/12 is fully financed and there is no financing gap,” he added.