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"id": 217972,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/217972/?format=api",
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"type": "speech",
"speaker_name": "Mr. Kimunya",
"speaker_title": "The Minister for Finance",
"speaker": {
"id": 174,
"legal_name": "Amos Muhinga Kimunya",
"slug": "amos-kimunya"
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"content": "Turning to overall expenditures, the overall expenditures in 2007/2008, excluding amortisation payments and restructuring costs, will amount to Kshs580.4 billion, which is about 28.2 per cent of our GDP and an increase from Kshs427.6 billion last year, which was about 23.4 per cent of the GDP. Last year means the year we are currently in. In line with the Government policy to shift resources from recurrent to capital Expenditures and core poverty programmes, the share of Recurrent Expenditure is projected to decline sharply from the level of 2006/2007 while domestically-financed capital expenditures are planned to increase from Kshs54.7 billion to Kshs85.1 billion; or from 3 per cent of GDP to 4.1 cent of GDP. Expenditures are, therefore, forecast to be development-oriented and with a special focus on improving the infrastructure in key priority sectors identified in Vision 2030, such as the road network, access to water, reliable and affordable energy and efficient and affordable telecommunications systems. Mr. Speaker, Sir, the overall Budget deficit, including grants, in 2007/2008, will be Kshs109.8 billion, which is equivalent to 5.3 per of our GDP, largely reflecting the substantial increase in our Development Expenditure. The net external financing amounting to Kshs39.8 billion or 1.9 per cent of the GDP is expected to cover part of this Budget deficit leaving Kshs70 billion or 3.4 per of the GDP to be financed through domestic borrowing which is Kshs34 billion and net privatisation receipts of about Kshs36 billion. The net domestic borrowing requirement of 1.6 per of the GDP is well below that of the current financial year which is 1.8 per cent of the GDP; and is consistent with the medium-term target of 1.5 per cent of our GDP. Mr. Speaker, Sir, allow me to emphasise that the proposed domestic borrowing of Kshs34 billion and the net privatisation proceeds of Kshs36 billion will all go toward financing our Development Budget which amounts to Kshs85 billion. That is to say, the proceeds raised will not be used at all to finance Recurrent Expenditure. Mr. Speaker, Sir, turning to expenditure reform measures, in the recent past, implementation of Annual Budgets has experienced some challenges, including implementation delays, weak linkages between actual spending and policy priorities in some line Ministries and expenditure linkages and low absorption of funds under the Development Votes, among others. As a result of these challenges, our potential for more rapid economic growth and employment has been constrained. In order to address these challenges and to institutionalise the framework for effective Budget implementation, starting with 2007/2008, the Treasury will closely monitor the implementation of the development budgets of key line Ministries and we have already started doing that. We will coordinate the development of result-oriented Budget performance benchmarks; and identify areas of public resource leakages and develop strategies for creating fiscal space to release resources of financing the priority Vision 2030 projects. To sustain the high economic growth and further reduce poverty, the Government will accelerate reforms in the public financial management in order to improve efficiency, enhance transparency and accountability under a coordinated strategy to revitalise the Public Finance Management. Mr. Speaker, Sir, to demonstrate our commitment to further deepen fiscal reforms, we have begun to entrench programme-based performance budgeting starting with the coming year. These measures are expected to ensure that budgetary allocations are based on programmes that are linked to clearlyspecified objectives and targets such as the Millennium Development Goals (MDGs) as well as the objectives of the Vision 2030. Mr. Speaker, Sir, turning to the deepening of the financial sector reforms, we fully June 14, 2007 PARLIAMENTARY DEBATES 1827 recognise the important role played by our financial sector towards the realisation of our development goals. We are also desirous in making Nairobi the financial services hub for the region. We will, therefore, continue with the targeted reforms for the sector. As part of these reforms, we will be tabling in the course of 2007/2008 the Savings and Credit Co-operatives (SACCOs) Bill, to regulate all SACCOs that take deposits from members. In addition, we will fully make operational the Insurance Regulatory Authority which is expected to strengthen the regulation of insurance companies and enhance the level of governance in the sector. We will also review the Capital Markets Authority (CMA) Act to strengthen the CMA supervisory capacity. Today, we will also be proposing some measures on the CMA. On the banking sector, Mr. Speaker, Sir, I will also be introducing in this House a Modern Banking Bill that will benchmark banks' operations with international best practices. In order for Nairobi to become the regional hub for financial services, it is important to strengthen the banking and insurance sectors so as to enhance the stability, efficiency and access of the overall financial sector. To achieve this objective, I will be proposing, later in my Speech, measures to increase the capital requirements for these two sectors over the next three years. I did earlier underscore the importance of containing inflation to low levels. In this regard, to strengthen the operational autonomy of the Central Bank of Kenya and enhance its capacity to effectively maintain a proper balance between the demand and supply of money to the economy, I will be introducing significant amendments to the Central Bank Kenya Act. Mr. Speaker, Sir, on privatisation and public private partnership for economic efficiency, to institutionalise transparency and accountability in the privatisation process, we will make fully operational the Privatisation Commission before the end of this calender year. In addition, preparations for the sale of Telkom Kenya shares to a strategic partner has now been completed and requests for proposals will be released to prospective investors within the next few days. We will also float additional shares of KenGen when we are satisfied that the market price reflects the fundamentals of the company and that the taxpayer will get a fair return. In addition, we intend to sell part of the Government's shares in Safaricom through an Initial Public Offer (IPO) on the Nairobi Stock Exchange (NSE). We will also be selling part of the Government's and the National Social Security Fund (NSSF) shares in the National Bank of Kenya. We intend to attract more financial and management resources from the private sector, through privatisation. In this regard, we are putting in place the necessary framework to allow active Government participation in the NSE to take advantage of favourable market conditions to offer shares in already listed companies without necessarily having to go through a second offer. Mr. Speaker, Sir, to attract more financial and management resources to enhance our productive capacity, the Government is in the process of finalising the policy, legal and institutional framework for the implementation of Public Private Partnerships (PPP). This framework is intended to allow private sector participation in the provision of key infrastructural services such as water, energy, roads and other transport services and it is critical for the financing of the flagship projects identified under the Vision 2030. We will also create an institutional framework to assess the fiscal risks associated with the PPP Projects. Soon, the Government will be inviting private sector participation in the development and operation of a free port facilities once the legal framework which is currently under preparation is approved by this House. Mr. Speaker, Sir, turning to sectoral priorities, I will begin with expanding the infrastructure for sustained development. In the Vision 2030, the Government, in consultation with a wide cross-section of Kenyans, has identified six priority sectors as having the highest potential for economic growth. These sectors are: tourism, agriculture, manufacturing, wholesale and retail trade, business processing outsourcing as well as financing. However, to exploit the gross potential 1828 PARLIAMENTARY DEBATES June 14, 2007 from these sectors, it is important to improve the infrastructure in areas that best support these growth engines, in addition to implementing key reforms in the public sector. Mr. Speaker, Sir, no country has achieved and sustained a high economic growth rate with poor infrastructure. We must, therefore, accelerate the expansion and rehabilitation of our infrastructure in order to enhance our efficiency and become globally competitive. The investments in infrastructure development are critical to the achievements of our MDGs. It is in this regard that we have allocated for main infrastructure development a total of Kshs166.8 billion in the year 2007/2008 which represents an increase of 113 per cent from Kshs78.3 billion in 2006/2007."
}