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"id": 246601,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/246601/?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": "Nonetheless, after we are through with the poverty reduction and growth facility programmes, we intend to continue our engagement with the World Bank and the IMF under the Policy Support Initiative so as to ensure our home-grown programmes meet internationally acceptable standards. In tandem, we are also expecting a country-rating mission from the world- renowned rating company, Standards and Poor's before the end of June, 2006. Such a rating will not only have a beneficial effect on foreign direct investments, it will also impact positively on the capacity of our private sector to access affordable financing from international markets. Mr. Speaker, Sir, the 2006/2007 Budget framework is set against the background of medium-term macro-economic framework which I have already outlined. It aims to accelerate economic growth through continued sound fiscal and monetary policies, a strengthening of structural reforms and governance and enhanced investment in fiscal and human capital. Let me start by providing a brief summary of the macro-economic assumption outlined in the proposed Budget. We anticipate the real GDP will increase by about 5.8 per cent in 2006/2007 provided the weather conditions remain normal and will be underpinned by continued strong growth in agriculture, manufacturing, construction, tourism, horticulture, transport and communications, as well as the financial and export sectors. Mr. Speaker, Sir, the 12 months inflation rate is expected to decline to about 5 per cent by the end of 2006/2007 from the 13 per cent reported in May, 2006, mainly on account of benign weather conditions and continued implementation of a prudent monetary policy. Our gross international reserves of the Central Bank of Kenya are targeted to remain at well above three months of import cover to adequately cushion the country against any external shocks. Our proposed monetary framework targets an increase in money supply of about 10 per cent through June, 2007 and provides enough space for a significant non-inflationary expansion of credit to the private sector to support projected economic growth. Mr. Speaker, Sir, the fiscal policy for 2006/2007 will continue to aim at containing the growth of non-core expenditure so as to create fiscal space to facilitate increased resources towards growth and poverty-reducing programmes. On revenue, as we aspire to become more self- sufficient in our development efforts, we will need to re-double our efforts in revenue collection. We are, therefore, targeting to collect revenues amounting to Kshs375.4 billion which is equivalent to 21.4 per cent of our GDP. This will be supported largely by the ongoing improvements in tax 1404 PARLIAMENTARY DEBATES June 15, 2006 and Customs administration. With increased independence comes increased responsibility. It is, therefore, imperative that each of us contributes to this effort of making Kenya less dependent on foreign resources. We expect the Kenya Revenue Authority to ensure that the rest of the set revenue targets are met while taxpayers will be expected to willingly pay their dues. On our part as a Government, we will make sure that the scarce resources are used effectively and in the most efficient manner. Mr. Speaker, Sir, our overall expenditure in 2006/2007 will amount to Kshs461.2 billion. In relation to GDP, our expenditures will remain relatively unchanged from the previous year at around 26.4 per cent of the GDP, as our planned reduction in the Recurrent Expenditure is offset by increase in Development Expenditure. This is in line with our strategies of increasing the ratio of resources going to development programmes. Recurrent Expenditure is estimated to rise by 7.6 per cent to Kshs338.3 billion. However, in terms of GDP, these expenditures are expected to fall from 20.1 per cent of GDP in 2005/2006 to 19.3 per cent of GDP in 2006/2007. This is on account of moderately lower spending on foreign interest payment, pensions and other expenditures. The Government's wage bill is expected to remain unchanged at about 7.4 per cent of GDP which translates to Kshs129.3 billion. This figure takes into account the wage awards for civil servants of Kshs2.1 billion and for teachers of Kshs4.9 billion. It is important to emphasise, however, that about two-thirds of the wage bill amounting to Kshs81.6 billion which is equivalent to 4.6 per cent goes to the education and health sectors, leaving only Kshs47.7 billion which is 2.7 per cent of GDP for the rest of the Civil Service. Mr. Speaker, Sir, a core requirement of our economic recovery strategy is that, development expenditure should rise as a proportion of both the Budget and GDP. Development Expenditure is expected to rise from Kshs86.9 billion which was 5.6 per cent of GDP in 2005/2006 to Kshs120 billion, which is 6.8 per cent of GDP in 2006/2007. This represents an increase of 38 per cent from the previous year and compares favourably with a growth of 11 per cent of overall expenditures. Expenditures are, therefore, focused to be more development oriented and with a special focus on improving the road network, access to water, reliable and affordable energy and efficient telecommunication system. Mr. Speaker, Sir, creating the fiscal space for priority social and development programmes requires sacrifices. Therefore, as part of the austerity measures to be implemented by the Government, starting in the new financial year on 1st July, 2006, a new transport policy in the public service aimed at reducing transport costs will on a pilot basis, be put in place. The re- organisation of transport and disposal of Government vehicles is expected to be completed by 30th September, 2006. Mr. Speaker, Sir, as from 1st July, I expect the number of Government vehicles on the road to be reduced significantly and only a few will be retained for use by essential Government service providers and constitutional offices such as the Police Department, health, Judiciary, the Electoral Commission of Kenya and the Kenya National Audit Office. Mr. Speaker, Sir, Ministers, Assistant Ministers and Permanent Secretaries will be allowed only one official car. To ensure equity, I have factored the savings arising from this measure into my Budget with a view to providing also transport allowance to all civil servants who will not be provided with transport any more. Mr. Speaker, Sir, before 1st July, the Government will issue further guidelines on the implementation of this policy. Therefore, the Estimates I am laying before this august House have no provision for purchase of motor vehicles for most Ministries. In the case of essential service providers and constitutional offices, I am directing that approval shall be sought from the Treasury before any purchase is effected. This measure will apply to all public bodies and not just the Civil Service. Therefore, from 1st July, no public officials will be expected to use official vehicles to and June 15, 2006 PARLIAMENTARY DEBATES 1405 from duty. Mr. Speaker, Sir, accelerating structural reforms is critical to maintaining our external competitiveness."
}