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"id": 250435,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/250435/?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",
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"content": " Thank you, Mr. Temporary Deputy Speaker, Sir. I stand, unfortunately, to oppose this Motion. While the spirit of this Motion is good, the logic 870 PARLIAMENTARY DEBATES May 3, 2006 is very persuasive and that the circumstances are quite understandable, but the reality is very different. We recognise that the rising oil prices together with the increase in the cost of food have resulted in inflationary pressure that, in the recent past, has adversely affected, not just the transport sector, but Kenyans generally, and obviously, increased the incidents of poverty. We, as a Government, are fully committed to mitigating these adverse effects of the high international oil prices by ensuring prudent monetary and fiscal policy management. This House will appreciate that despite the very high oil prices currently at upwards of US$73 per barrel, which is the highest the price has been in a long time, the pump prices have not shot up as much as they would have before, because of the efforts we have made in stabilising the currency to cushion the market from the exchange losses. Mr. Temporary Deputy Speaker, Sir, I am encouraged by contributions that have been made by hon. Members on this Floor. Yes, we want to support Kenyans and reduce poverty, but we must remember that as we do that, we will not fight poverty by reducing the tools that we require to fight it. We will only fight poverty by investing more in fighting poverty. Mr. Okemo gave a classic situation by saying: \"Let us leave the money with the people, so that they can fight poverty on their own.\" I am sure the Chair is aware that, that approach was tried in the past, where we said that people should be left with the money to pay their school fees, hospital bills and so on. We saw what happened to this nation. People did not pay for school fees or hospital bills. We ended up with 1.2 million children out of school. We ended up with all manner of problems in the health sector and dilapidated infrastructure. So, we, as a responsible Government, believe we should be mobilising all these resources from all manner of places and then applying the resources to investments that reduce poverty levels in this country. Mr. Temporary Deputy Speaker, Sir, this House will appreciate that we put in a lot of resources in education, upwards to the tune of Kshs70 million. We have also put in resources in the health sector. We also pumped a lot of resources into our water sector. We are also pumping resources into the mitigation of drought issues and generally for the improvement of infrastructure, which, combined, will lead to the effect that we desire, of reducing the number of people living below the poverty line, from 56 per cent to manageable levels. This House is also appreciative of the fact that we are putting an upwards of Kshs7 billion in the Constituencies Development Fund (CDF) at the rural areas, at the centre of where people are, to create for them people-based development programmes that will alleviate poverty. Mr. Temporary Deputy Speaker, Sir, I am quoting the Kshs7 billion earmarked for CDF, because from our own rough calculations of the economic impact of this Motion, we project that it will not be viable. Based on our projection of fuel consumption in the year 2006/2007, we anticipate that kerosene consumption will be 301,000 metric tonnes, which translates to about 555 million litres. Consumption of super petrol will be 388,000 metric tones, which translates to about 715 million litres, while consumption of diesel is estimated at 961,000 metric tonnes, which translates to 1,072,000,000 litres. The monetary impact of this Motion is that by reducing the rate by Kshs2, we will in effect be reducing the revenue that we expect to collect from these sources by Kshs1.1 billion for kerosene, Kshs1.4 billion for super and Kshs3.5 billion for diesel. This adds up to Kshs6 billion. This Kshs6 billion is just Kshs1 billion short of the amount we are spending on the CDF. Two weeks ago, when I tabled the Supplementary Estimates in this House, I indicated that we have a deficit of Kshs31 billion, which we have to borrow from our domestic market. The effect of pushing this deficit further by an extra Kshs6 billion will be that we will have to go back to the domestic market to borrow these money. We will have to borrow more money to meet the expenditure that we committed ourselves to in order to mitigate effects of poverty. This will have a knock on effect on all expenditure, because interest rates will affect not only the volume but also May 3, 2006 PARLIAMENTARY DEBATES 871 the value of transactions. It might be important for hon. Members to appreciate that the Excise Tax that we are talking of is actually levied on volume and not on value. What has happened is that, because of the way of managing the economy and maintaining inflation at low rates, in effect the consumers have had real savings in terms of value of money over the last 6 years, during this period there has been no adjustment of this Excise Tax by what we estimate as 50 cents per year per litre. This means that basically during the last 6 years the real cost of fuel -inflation adjusted - has actually gone down by between Kshs1.50 and Kshs2.50 per litre. Mr. Temporary Deputy Speaker, Sir, kerosene has been referred to by many hon. Members, and I know it is used by most of our people in rural areas. You may recall that one or two years ago - I believe it was in the 2002/2003 Budget - that there was an increase in the Excise Duty rate from 5.7 to 6.7 per litre. The objective of this was to achieve some parity between the Excise Duty rate on diesel and kerosene to avoid illegal mixing of kerosene and diesel that used to occur. This had a negative effect on our car engines. We need to look at some of those things that were done in the past for reasons other the desire to collect revenue. I have indicated that by implementing this Motion we will increase our deficit by Kshs6 billion. I have also indicated that we have drought-related expenditures that would need more resources. We have a request by hon. Members to adjust the CDF rate upwards and other expenses that have been adjusted upwards. We have also got situations where we are not factoring any bilateral or multilateral support by donors until it is confirmed. As of now, based on our own framework for the Financial Year 2006/2007, we will have a deficit of Kshs16 billion. Increasing this deficit further can only worsen the situation for the very people we want to save. The perception that reducing the Excise Duty by Kshs2.00 would automatically translate to gains by the people is not correct. We know that this has not happened in the past. I am glad that some hon. Members mentioned that. The oil companies will not necessarily respond to this reduction. What will happen is that we will be telling our wananchi that we want their fuel prices reduced, but the real beneficiaries will be the oil companies, who will rake in more profits. They will maintain their pump prices, and will not necessarily pass on any benefit to our people. The Kenyan people will have lost an opportunity to mobilise Kshs6 billion which would have been used to construct better roads. These funds can be used to develop efficient transport modification, promotion of alternative energy, including investments in bitumen and power that would translate into better living standards for our people. Mr. Temporary Deputy Speaker, Sir, what we need is more competition and surveillance in the petrol sector, so that we can reduce fuel prices to the benefit of our people. We need better roads and more empowered citizenry that looks at wealth creation, and not the poverty they are in, as the way to get themselves out of their poverty. Before I conclude, I would also mention that there is a tendency coming out, which may be unconstitutional, where we are trying to introduce an extra tax on some commodities. I have heard proposals to increase duty on cigarettes, beer and other items to recoup what we will lose through the proposed reduction in duty. I believe that this House cannot levy extra taxes on anybody or discuss that possibility without offending the Constitution. The impression that has been created here is that our economy is being managed by the IMF and the World Bank. The impression is that all these prices are as a result of micro- management by the IMF and the World Bank. I would like to confirm to this House that our economy is run by a Government that was elected by the Kenyan people. Its management is based on policies and laws that are enacted by this House. We are together in this partnership of running this economy. Therefore, the impression that is being created that the International Monetary Fund (IMF) and the World Bank are micro-managing this economy can only be unfortunate. I believe, 872 PARLIAMENTARY DEBATES May 3, 2006 we need to have that in perspective in terms of looking forward to say: \"How do we help Kenyans get out poverty? We are going to help them get out of poverty by considering, as a House, how we can play our oversight role in controlling expenditure. As a House, we need to ask ourselves: How can we contribute to the wananchi part of the Kshs5 billion that is budgeted for this House? Can we plough some of that back to the wananchi through savings in our foreign travel and our own costs so that at the end of the day, the wananchi will reap the benefits from the savings we will be making from ourselves as a Government, from the savings that would be made by this House, other organs and extra efficiencies through our parastatals which would then be translating into investing in the people. Mr. Temporary Deputy Speaker, Sir, I know the Motion is emotive and it touches our people. I know we all have vehicles and we feel the cost of increases in terms of the pump prices. I also know that we would all like to see our fuel prices come down so that we can enjoy more comfortable rides. I am sure that our people will enjoy that. However, the reality is different. Let us not strangle the very people we want to save by reducing the means for providing them with the infrastructure that they need, education for their children, health for them and the food that the hungry deserve by saying that we take off Kshs6 billion from the Budget. I know Mr. Okemo tried to create a situation we can ring-fence. However, once you reduce it, there is nothing to ring-fence. Once it is out and it is with the people, you cannot ring-fence it. You actually need to tax it and get it, and then we can ring-fence it by saying that of the total amount we are getting, we will be using it on specific sectors. In fact, I would like to urge this House that perhaps this Motion should have been that we should be increasing the taxes we are collecting on fuel to insulate the health sector, provide better roads, expand our road network and inject more money into our education so that we have better educated Kenyans whom we can supply to the world to bring in more revenue. Mr. Temporary Deputy Speaker, Sir, I cannot belabour this point further but I would like to urge this House to look at the reality of the situation. Let us not be persuaded by the emotions of it. We know that the spirit is good. In different circumstances, I would have said, yes, we need it now. However, at this point in time and given the state of our economy, we need every coin that we can mobilise from all sources. For now, I would like to urge this House to vote against this Motion, not because we do not agree with its spirit, but because it will be counter-productive to the intentions we have, as a House, in terms of alleviating poverty for the Kenyan people. With those few remarks, I beg to oppose."
}