BAC decries low budget allocation to trade sector
By Lewis Njoka, March 23, 2021
National Assembly’s Budget and Appropriations Committee (BAC) has expressed concern over the low allocation of resources to trade and industry sub-sectors, despite being key in steering economic recovery from Covid-19 knocks.
In its 2020/21 Supplementary Estimates report, BAC noted that the sector has been allocated only 0.4 per cent of the total ministerial allocations despite being a productive sector and one that will play a key role in reversing the effect of the pandemic on the economy.
The 2020/21 budget Sh3.2 trillion budget was signed into law on June 30 last year of which Sh1.8 trillion was to be raised through ordinary revenue.
“Given that trading has commenced under the African Continental Free Trade Area agreement which creates the largest free trade area in the world, and the recent ratification of the Economic Partnership Agreement with the UK, enough resources should be allocated to this sector to enable the country to fully exploit the available opportunities and reap the benefits on account of these milestone trade agreements,” the report reads in part.
BAC said this should be done along with policy reforms and trade facilitation measures, to enable diversification of exports and facilitate foreign direct investments in the country.
The 2020/21 supplementary budget is proposing a 4.3 per cent increase in the approved budget, a Sh125.68 billion increase. If adopted, development budget will be increased by Sh59.81 billion while recurrent spending will be increased by Sh20.22 billion.
Consolidated Fund Services will be increased by Sh45.65 billion. In terms of recurrent budget, the department for crop and agriculture research will receive a Sh12.4 billion increase to go towards clearing pending bill for the maize subsidy, Teachers Service Commission will receive Sh7.99 billion while Ministry of Defence and the National Intelligence Service will receive Sh6.7 billion and Sh6.5 billion respectively.
Development budget Under the development budget, the rail transport programme will receive an extra Sh33.3 billion, Treasury’s public finance management programme Sh14.8 billion while the Ministry of Health will receive Sh10.9 billion The health, policy standards and regulations programme under the under the Ministry of Health’s recurrent budget, on the other hand, will receive a Sh5.12 billion reduction.
“The supplementary budget has been necessitated by the need to take care of post-Covid-19 related interventions, payment of pending bills, salary adjustments, changes in development partners funded projects, rationalisation of the budget, among other challenges,” says the BAC report.
The total Sh125 billion proposed increase in expenditure, however, is happening in the context of significant economic and revenue underperformance with revenue adjusted to 16.7 per cent of gross domestic product (GDP) down from 16.8 per cent.
Despite the downward revision in revenue estimates, the supplementary budget is proposing an increase in expenditure levels and has therefore expanded the deficit from 7.5 to 8.9 per cent.
Given the expected revenue underperformance, the Sh125 billion increase in fiscal deficit will mostly be funded by commercial borrowing where Sh46 billion will be borrowed locally while Sh80 billion will be raised externally through sovereign bond.