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"id": 1383787,
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"content": "Looking forward, and driven by food inflation, we can see our inflation going lower and lower, especially on the lower band which is below 5 per cent. In the same breath, we have seen quite significant improvements in our exchange rate market. At some point, we could see other currencies rallying against our local currency. Recently, out of the meticulous policies of this House and the right Government instruments, especially by the Central Bank of Kenya (CBK), we have been able to see our domestic currency gradually becoming stronger. Some of the issues that I have talked about are far-reaching, but very important. There is something that we are doing on each. As we grow primary production, which is the bullwork of our economy, it behoves all of us to have the right policies that accelerate secondary and tertiary production. In terms of primary production in this BPS, we have allocated significant ceilings for the purchase of farm inputs such as subsidised fertiliser and seeds, both for cash crops and food crops. We have input ceilings for the purchase of BT cotton, which is also a cash crop in Kenya, and for other issues that I will be talking about as I conclude. In regards to inflation, what we have major control over is food and core inflation. Fuel inflation, to a large extent, is determined by exogenous variables that are beyond our control. In terms of food inflation, as I said earlier, there are policies in this BPS to ensure that we continue to boost the production of food to balance between demand and supply as farmers strive to feed the country. Core inflation is part of the reason we have been seeing an escalation of interest rates. As I moved a similar report last year, the world was looking gloomy and dark because when the USA coughs, as Members know, the majority of other economies catch a cold. By that time, the USA was coughing through something called inflation. For them to contain inflation, they had to continually raise their basis points and the Fed rate from zero to 0.25 per cent to the current which is around 5.2 per cent. The USA had to raise their Fed rate 11 consecutive times. That, of course, had ramifications at home because, as they tried to contain their inflation, they caused an imbalance in the exchange rate market. This is because their currency is the dominant and solid currency that the world uses to transact. To apprise Members, we have seen CBK raising the base rate, especially in the recent past, up to the current 13 per cent. This has been to control what we call net capital inflows. When we say the currency is weakening domestically, it happens when there is a lot of demand for external currencies. To balance that, we have to do things that bring about other currencies into Kenya so that we have more supply of them to be able to strengthen ours. In that regard, CBK had to raise interest rates to contain inflation but, more importantly, to make Kenya desirable as an investment destination, especially in regard to capital inflows. The exchange rate is determined by the balance of payment which has two components. There is the import and export components, which give us net exports. On the other side, there is a plus of capital inflow minus capital outflow which then gives us net capital inflows. Import and export components are handled through fiscal policies. That is what we have been doing by raising our exports and also by creating an enabling environment for import substitution. On the other side, the capital account is managed through monetary policies. That is why CBK has been doing the needful to stabilise our currency. And we have already seen the fruits of that. In the Budget that we will present later in the year, we have set ceilings in Kenya shillings. On this, I will talk slowly, if you permit me. We have set a Budget of Ksh4.188 trillion. On the revenue side, our number one revenue stream is ordinary revenue. We have set our ordinary revenue target at Ksh2.94 trillion. After that, we have what we call Appropriations-in-Aid (A-in-A). That is the money that Government institutions receive when they offer services to the Kenyan people, such as paying university fees in a public institution. That is the money that the Government institutions are given authority to spend at source. We have set A-in-A at Ksh486 billion. The other revenue stream is grants. We are expecting grants The electronic version of the Official Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Hansard Editor"
}