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"id": 217959,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/217959/?format=api",
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"type": "speech",
"speaker_name": "Mr. Kimunya",
"speaker_title": "The Minister for Finance",
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"id": 174,
"legal_name": "Amos Muhinga Kimunya",
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"content": " Mr. Speaker, Sir, I beg to move that Mr. Speaker do now leave the Chair. Once again, I feel very honoured to present to this esteemed august House my second Budget as the Minister for Finance. As hon. Members are aware, this is the Fifth Budget of the Administration of His Excellency the President, hon. Mwai Kibaki. Hon. Members, this year's Budget is intended to lay a solid foundation for transforming our country into a globally competitive and prosperous nation with a high quality of life by the year 2030. As we enter the fifth year of broad-based economic growth, accompanied by four years of successive increases in per capita income and a substantial reduction in poverty within a span of only five years, it is important to reflect back on some of the key economic promises we made to Kenyans at the beginning of the current Administration and the extent to which the Government has delivered on those promises. Mr. Speaker, Sir, during the past four and a half years, we have implemented, with determination and consistency, bold economic and structural policies that are elaborated in the Economic Recovery Strategy that was launched by His Excellency the President in June, 2003. Our development agenda, as embedded in this strategy, whose implementation comes to an end in December, 2007, was anchored on three key pillars, namely:- (i) The restoration of economic growth within the context of a stable macro-economic 1820 PARLIAMENTARY DEBATES June 14, 2007 environment; (ii) Enhanced equity and poverty reduction; and, (iii) Improvement of governance. These pillars were carefully chosen to pull our economy out of a recession and to commence the journey towards the broad-based economic recovery that we are now witnessing and which is touching on all sectors of our society. Mr. Speaker, Sir, the score card of our efforts is now out and it is with great sense of pride and satisfaction that I beg to inform hon. Members, and my fellow Kenyans, that this Government has achieved a resounding success in all the three pillars. As a result, investor confidence has never been higher, our farmers are enjoying better returns on their investments and more of our rural people, especially those in the Arid and Semi-Arid Lands (ASALs) have access to clean water, electricity and affordable health care services. In addition, more children are now able to go to schools and our public sector is more efficient in delivering services and on its mandate of facilitating private sector development. On the restoration of economic growth, it is gratifying to note that through continued hard work by fellow Kenyans, who have literally taken to heart His Excellency the President's clarion call on Madaraka Day of 2003 of building a \"working nation\", the growth of our economy has expanded from virtual stagnation in 2002 when it expanded by only 0.5 per cent, to a high and sustainable rate of 6.1 per cent in 2006. The strong growth that we have witnessed has touched all sectors and benefited all hardworking Kenyans and, in particular, the agricultural sector has improved markedly from negative 3 per cent in 2002 to 5.4 per cent in 2006. The manufacturing sector output expanded by 6.9 per cent in 2006 up from 0.1 per cent in 2002. The hotel and restaurant sector has recovered strongly from a decline of 20.3 per cent in 2003 to a growth of 14.5 per cent in 2006, with an annual growth rate of an incredible 37 per cent in hotel occupancy. With lower interest rates and increased remittances from Kenyans in the diaspora, construction has picked up substantially from negative 2 per cent in 2002 to 6.3 per cent in 2006. The transport and communications sector has also experienced a strong growth from a low of 3.5 per cent in 2003 to 10.8 per cent in 2006. The wholesale and retail trade sector has risen from negtive 2.5 per cent in 2002 to 10.9 per cent in 2006. Reflecting confidence in the economy, and increased profitability of companies, the Nairobi Stock Exchange index has increased by 314 per cent, reflecting an increase in market capitalisation; from just about Kshs112 billion to Kshs792 billion in 2006, a compounded annual increase of 63 per cent per annum. Finally, total exports have almost doubled since 2002, underpinned by strong growth in coffee, tea and horticultural exports. Reflecting the improved exports and capital inflows, international reserves held by the Central Bank of Kenya have more than doubled since 2002, rising from US$1.2 billion in 2002, to the highest level ever recorded of US$2.5 billion in 2006. Mr. Speaker, Sir, as a result of this sustained economic expansion, the growth in per capita income has rebounded strongly from a decline of 2.5 per cent in 2002 to an increase of 3.3 per cent in 2006. The result of this growth, as reported in the most recent Integrated Household Budget Survey, is that overall poverty has declined from 56.8 per cent in 2000 to 46 per cent in 2006, a remarkable reduction of about 20 per cent. Even more significant is the 35 per cent reduction in rural poverty; from 51.5 per cent in 2000 to 33.7 per cent in 2006. The strong economic performance reflects the Government's pursuit, since 2003, of reforms as well as prudent monetary and fiscal policies aimed at ensuring a stable macro-economic environment, which is necessary to encourage the private sector investment growth and job creation. Arising from consistent implementation of these measures, inflation and exchange rates have stabilised while the average lending rate of commercial banks has declined from about 19 per June 14, 2007 PARLIAMENTARY DEBATES 1821 cent in 2002 to about 13 per cent currently. Similarly, the ratio of domestic debt to the Gross Domestic Product (GDP) has declined from 22.9 per cent in 2002 to 18 per cent in 2006. This has provided room for non-inflationary expansion of credit to the private sector for productive activities. Mr. Speaker, Sir, on the fiscal front, despite a reduction in the Value Added Tax (VAT) rate from 18 per cent to 16 per cent in 2003 and the lowering of the East African Community (EAC) Custom Tariffs, following the implementation of the East African Community Common External Tariff, revenue collection has been kept above 20 per cent of the GDP, which has enabled us to finance about 95 per cent of our Budget from our own resources. Indeed, one of the most remarkable achievements of this Administration has been the ability to sustain fiscal discipline in the absence of significance external budgetary support. This is, indeed, a significant achievement and we are committed to continue on this path to ensure that our budgetary framework is not subject to the unpredictability associated with the external budgetary financing. With strong revenue efforts and expenditure restraint, net domestic borrowing has largely been contained, falling from 3.6 per cent of the GDP in the 2002/2003 Financial Year to about 1.8 per cent of the GDP in 2006/2007 Financial Year. Mr. Speaker, Sir, based on the structural reforms we have implemented so far, Kenya recently received some very positive ratings by independent international institutions. I will just cite three of these. From the Standard and Poor's (S&P) rating agency, we received a favourable initial sovereign credit rating of \"B+\" for foreign currency debt and \"BB-\", for local currency long- term sovereign debt. Within sub-Saharan Africa, only the mineral-rich countries such as Botswana, South Africa and Nigeria have a higher sovereign rating from S&P than this country. Mr. Speaker, Sir, from the Global Integrity, which assesses the existence and the effectiveness of anti-corruption mechanisms that promote public integrity, we received a moderate rating along with such countries as Argentina and Brazil, among others. More recently, from the World Bank's Country Policy and Institutional Assessment (CPIA), Kenya's rating on policy implementation has improved significantly from the fifth and bottom quantum in 2002, to the second quantum by 2005, and we expect further improvements by the end of this year. Mr. Speaker, Sir, turning to the second pillar on enhancing equity and poverty reduction, a key prerequisite in addressing these two issues is having rapidly expanding economy, which we have achieved. However, in order to ensure that the growth is shared among our fellow citizens, this Government has implemented a number of targeted fiscal interventions, structural reforms and regional development initiatives aimed at reducing poverty and inequality in our society. As all hon. Members and Kenyans are aware, this Government has done, at least, the following:- (i) We have introduced the universal free primary education which has increased enrolment by over 1.5 million pupils since 2003, thereby assuring them of a secured future and relieving their parents of school fees burden. This, in turn, has helped the parents to increase their disposable income. As you are all aware, we have extended this further to secondary education starting with tuition fees effective January next year. (ii) This Government has also increased the share of resources allocated towards priority development areas of agriculture and rural development, provision of infrastructure and human development, including the core poverty programmes, thereby underscoring the importance this Government attaches to laying a firm base for economic prosperity and reducing income inequalities. (iii) We have implemented various structural reforms in the agricultural sector, including the dairy, sugar, coffee, tea, pyrethrum and the co-operative sectors, with a view to improving productivity and income earnings of Kenyans working in these sectors. (iv) We will reform the public sector to improve efficiency and effectiveness, including 1822 PARLIAMENTARY DEBATES June 14, 2007 removing the administrative barriers to trade, privatising and restructuring of key public entities and streamlining of licences aimed at reducing the cost of doing business. We will be doing more of that today. We have also introduced performance contracting in the public sector and enhanced private sector participation in our economy so as to create more jobs. (v) We have also increased resources targeted at promoting regional development and reduce poverty in rural and the urban areas. For instance, the Government has increased the Constituencies Development Fund (CDF) allocation more than eight-fold from the initial Kshs1.2 billion in 2003/2004 to Kshs10 billion this financial year and Kshs10 billion the financial year beginning July, 2007, while the budgetary allocation under Local Authorities Transfer Fund (LATF) has more than doubled from Kshs3 billion in 2002/2003 to Kshs6.5 billion in 2006/2007, and it is projected to rise to a record Kshs9.2 billion in the year 2007/2008. (vi) We have facilitated construction of at least 1,000 dispensaries and deployed personnel and medical supplies to make these facilities operational basically to improve access to medical care. (vii) We have also deliberately targeted expenditures and development programmes to improve the quality of life in the Arid and Semi-Lands (ASALs), the only Government to do this since Independence. Other key initiatives implemented by the Government, include the sinking of boreholes and reviving and making operational the Kenya Co-operative Creameries (KCC), the Kenya Meat Commission (KMC) and several others to generate income-earning opportunities for livestock farmers, especially from the ASAL areas. Mr. Speaker, Sir, other pro-poor programmes we have been implementing include the rural electrification in the entire country where we have spent over Kshs13.4 billion over the last four years; the Rural Access Roads Programme under the Roads 2000, rural health services where we have spent over Kshs18.3 billion over the last four years, and the very successful Youth Enterprise Development Fund that started in the current fiscal year aimed at empowering our youth for the future. Mr. Speaker, Sir, as I mentioned earlier, as a result of all these deliberate and bold policy interventions, the incidence of poverty has declined from 56.8 in 2000 to 46 per cent currently. Indeed, more Kenyans living in the urban and rural areas are living generally a better life today than they did six years ago. The anti-poverty interventions we have implemented since 2003 have also reduced divergence in the incidence of poverty across the regions, thereby reducing inequality in development and income distribution. For example, the largest reductions in poverty incidence outside Nairobi were recorded in Nyanza, Eastern and Western provinces."
}