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{
"id": 1527692,
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"text_counter": 96,
"type": "speech",
"speaker_name": "Hon. Kingi",
"speaker_title": "The Speaker",
"speaker": null,
"content": " Next Order."
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{
"id": 1527693,
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"text_counter": 97,
"type": "heading",
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"speaker": null,
"content": "MOTION"
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{
"id": 1527694,
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"content": "ADOPTION OF REPORT ON THE 2025 BUDGET POLICY STATEMENT"
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{
"id": 1527695,
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"type": "speech",
"speaker_name": "Hon. Kingi",
"speaker_title": "The Speaker",
"speaker": null,
"content": " The Chairperson of the Standing Committee on Finance and Budget, proceed."
},
{
"id": 1527696,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1527696/?format=api",
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"type": "speech",
"speaker_name": "Sen. Ali Roba",
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"content": "Thank you, Mr. Speaker, Sir. I beg to move- THAT the Senate adopts the Report on the Standing Committee on Finance and Budget on the 2025 Budget Policy Statement laid on the Table of the Senate on Wednesday, 12th March, 2025, and pursuant to section 25(7) of Public Finance Management Act and Standing Order No.187(7) of the Senate, the Senate approves the 2025 Budget Policy Statement. The electronic version of the Senate Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Director, Hansard and AudioServices, Senate."
},
{
"id": 1527697,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1527697/?format=api",
"text_counter": 101,
"type": "speech",
"speaker_name": "Sen. Ali Roba",
"speaker_title": "",
"speaker": null,
"content": "Section 25(2) of the Public Finance Management Act, Cap. 412A, provides that the National Treasury shall submit to Parliament a Budget Policy Statement on or before the 15th of each year. Pursuant to these provisions, the National Treasury and Economic Planning submitted the Budget Policy Statement to Parliament on 13th February, 2025. Subsequently, the 2025 Budget Policy Statement was tabled in the Senate at its plenary sitting held on 13th February, 2025, and thereafter it was committed to this Committee for processing. The Budget Policy Statement is a Government policy document that sets out broad strategic priorities of the Government and how to fund them, including borrowing. The Budget Policy Statement ordinarily contains an assessment of the current state of affairs of the economy, including the macro-economic forecast as well as Government priorities in terms of the current pillars of growth and strategic directions. It also includes the financial outlook concerning Government revenues and expenditures as well as a borrowing framework to finance the budget over the next financial year and the medium term. It also includes the proposed expenditure limits for the national Government, including Parliament and the Judiciary, as well as the shareable revenue indicative for county governments. It also includes the fiscal responsibility principles and objectives over the medium term, including limits on the total debt. The Committee engaged with various stakeholders among them, the Commission on Revenue Allocation (CRA), the Council of Governors (CoG), the Institute of Certified Public Accountants of Kenya (ICPAK), the Bajeti Hub, the County Assemblies Forum (CAF), the Institute of Public Finance, HENET, the Institute of Economic Affairs, Okoa Uchumi, among others. In total, we engaged with 13 constitutional commissions and two independent offices. Members of the public like Mr. Kelvin Ronyo, Mr. Peter Njoroge and Mr. Eliud Matindi, have also submitted their memorandum to the Committee. The theme of the 2025 Budget Policy Statement is consolidating gains under the bottoms-up economic transformation agenda for inclusive green growth. The Policy envisions global economic growth of 3.2 per cent in 2024 and projected 3.3 per cent growth for 2025 and 2026. Economic growth in developing economies like ours was projected to stabilise at 4.2 per cent. I am happy to report that ours stabilised at 4.6 per cent in the preceding year, supported by technological advancement, a growing consumer base, and infrastructure development. The National Treasury initially projected economic growth for 2024-2025 at 5.6 per cent, but the actual performance declined to 4.6 per cent. The Budget Policy Statement projects that in the coming years 2025-2026 and 2026-2027, the economy will grow at 5.3 per cent in both those two years. This expected improvement from 4.6 per cent is attributed to expected agricultural performance favourable in the current financial year to continue in the coming financial year, supported by Government policies such as subsidised fertiliser and stabilisation of our currency. The Budget Policy Statement indicates that inflation has gone down and remained within the five per cent target band since 2024. It was primarily driven by substantial drops in energy prices globally and ongoing moderation of food prices, which have also The electronic version of the Senate Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Director, Hansard and AudioServices, Senate."
},
{
"id": 1527698,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1527698/?format=api",
"text_counter": 102,
"type": "speech",
"speaker_name": "Sen. Ali Roba",
"speaker_title": "",
"speaker": null,
"content": "stabilized. Key contributors to the decline in overall inflation are consistent with negative growth in fuel and food prices in the country between January, 2024 and January, 2025, especially due to currency appreciation of the Kenya shilling, which now stand at about 128.5 to the dollar. Under the revenue outlook, the projected total revenue collection for the Financial Year 2025/2026 is Kshs3,385.8 billion, which is about 17.6 per cent share of the Gross Domestic Product. This represents an improvement of 11 per cent, which translates to Kshs325.8 billion. Relative to this projection of Kshs3.60 trillion for the financial year 2024, the outlook is better. The Government expects to collect Kshs2,825,000,000 as ordinary revenue and Kshs550.7 billion from ministries in the form of appropriation-in-aid. In the first half of 2024/2025, our economy's total performance fell short of the target by Kshs107.7 billion from the projected Kshs1,442,300,000,000 as of December 2024, with a collection that was realised of Kshs1.3 trillion. This was majorly occasioned by the underperformance of ordinary revenue to the tune of about Kshs93.3 billion. The 2025 Budget Policy Statement proposes several initiatives to improve revenue collection, including operationalising national tax policy and the medium-term revenue strategy from 2025/2026 to 2026/2027. The proposed overall budget for the Financial Year 2025/2026 is projected to be Kshs4.336 trillion, which is 9.8 per cent, translating to Kshs387.7 billion above the approved expenditures in Supplementary Estimates One for the Financial Year 2024/2025. The main drivers of the increase in the proposed expenditures are the national Government ministerial expenditures, which are set to increase by 11 per cent, translating to Kshs261.6 billion. Increased expenditures under Consolidated Fund Services (CFS) of Kshs131 billion, and the projected fiscal deficit for Financial Year 2025/2026 at Kshs831 billion, which stands at 4.3 per cent of the Gross Domestic Product (GDP), from the actual borrowing for Financial Year 2023/2024, which was Kshs880.5 billion. Mr. Speaker, Sir, the shareable or ordinary revenue is expected to grow from the projection of Kshs2,575.9 billion at the end of Financial Year 2024/2025 to Kshs2,835 billion in the Financial Year 2025/2026. Out of this, the Budget Policy Statement (BPS) proposes to allocate Kshs405.1 billion to county shareable revenue, which is equivalent to 14 per cent of the shareable revenue. This is translating to about Kshs17 billion increase from the current Kshs387.4 billion allocated in Financial Year 2024/2025. Mr. Speaker, Sir, the Government proposes an additional allocation to county government to the tune of Kshs69.8 billion in the Financial Year 2025/2026 as additional revenues to county governments. The additional resources are Conditional Grants, translating to Kshs12.89 which is directly from the national Government share, and proceeds from loans and grants from development partners, translating to Kshs56.91 billion. Mr. Speaker, Sir, in the Financial Year 2025/2026, the Government proposes to allocate Kshs10.5 billion to the Equalization Fund, out of which Kshs7.8 billion is the 0.5 per cent constitutional requirement and Kshs2.7 billion as contributions towards arrears; which has never literally worked. The arrears now stand at almost 39 billion. The electronic version of the Senate Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Director, Hansard and AudioServices, Senate."
},
{
"id": 1527699,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1527699/?format=api",
"text_counter": 103,
"type": "speech",
"speaker_name": "Sen. Ali Roba",
"speaker_title": "",
"speaker": null,
"content": "Mr. Speaker, the fiscal risk relating to county governments also has been indicated in the BPS. From a projection of Kshs80.9 billion of Own Source Revenue (OSR) collection, the county governments for Financial Year 2023/2024 only managed to collect Kshs58.9 billion, which indicates a revenue shortfall of Kshs22 billion. The Committee held a total of 12 sittings to deliberate on the BPS and made several observations, which include- (a) The proposed revenue mobilization strategy as contained in the BPS for 2025/2026 is similar with the one that they proposed in 2024/2025 BPS, which raises concern about the effectiveness of these initiatives in regard to expected robust revenue performance as projected by the BPS. (b) The planned borrowing of Kshs684.2 billion from the domestic market and Kshs146.8 from the external sources to finance the projected budget deficit of Kshs831 billion for Financial Year 2025/2026 may lead to crowding out private sector lending as banks will prefer lending to Government over the private sector. This also poses a major risk to the private businesses in the country. The most preferable situation is that of larger borrowing from the international lenders and limiting borrowing from the local market. (c) The ordinary revenue is projected to grow by about 10 per cent, which is an increase of Kshs259.1 billion. However, despite this overall growth, the county equitable share for Financial Year 2025/2026 is proposed to increase by a paltry Kshs17.7 billion. (d) In December 2024, the Intergovernmental Relations Technical Committee (IGRTC), identified and delineated and transferred several functions to county governments. However, the BPS 2025 does not outline a framework for allocating resources to the transferred functions; which is necessary resources to support these functions. The absence of clear policy direction contradicts the principle that resources follow functions, potentially hindering effective service delivery at the county level. Mr. Speaker, Sir, the Government intends to scale up funding for the road sector, including financing and settlement of pending bills. The road sector, as you know, is very key to mobility and economic performance of this country. However, there are limited finances and there have been accrued pending bills by both levels of Government. However, in this regard, the BPS has not brought out that aspect of clarity on the borrowing of the infrastructure bond that is intended to be floated. This would be financed by the increase levy of Kshs7 per litre that was projected so that we could settle the road sector pending bills. It also includes using part of the Road Maintenance Levy Fund (RMLF) as security to borrow and raise additional funds of about Kshs175 billion to pay pending bills. Mr. Speaker, Sir, it is not only the national Government which has pending bills on the road sector. The county governments also have pending bills. The additional Kshs7 following the rise of the levy from Kshs18 to Kshs25 in July last year is intended to finance the bond to collect about Kshs175 billion. This major shift means front- loading the use of RMLF by accessing quantum amounts now and use the periodic collection to offset the facility. The electronic version of the Senate Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Director, Hansard and AudioServices, Senate."
},
{
"id": 1527700,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1527700/?format=api",
"text_counter": 104,
"type": "speech",
"speaker_name": "Sen. Ali Roba",
"speaker_title": "",
"speaker": null,
"content": "The Committee has recommended setting aside Kshs13.9 billion from the expected collection of RMLF for Financial Year 2025/2026 and a proportionate amount as a share of the Kshs175 billion to also facilitate county governments to offset their pending bills on roads. Mr. Speaker, Sir, while recent Cabinet proposal to merge Kenya Urban Roads Authority (KURA) and Kenya Rural Roads Authority (KeRRA) is a step in the right direction, the BPS has not addressed itself to the issues relating to what that will entail in both those entities. The Committee made several recommendations which included financial recommendations as follows- (a) The county equitable share for Financial Year 2025/2026 be increased to Kshs465,001,459,673 for the county government. (b) The national Government equitable share to be apportioned at Kshs2,359,449,965,860. (c) That the Equalisation Fund be allocated Kshs10,589,554,076. (d) That Additional Allocations to counties be Kshs69,802,409,624. The commissions and independent entities that appeared before this Committee have presented very justifiable reasons why some adjustment in terms of budgetary allocation is to be realized. The cumulative allocation proposed by the Committee is about Kshs2.4 billion for Financial Year 2025/2026. The justification by the Committee for the proposal of Kshs465 billion to shareable revenue to county governments is as follows- The Committee's recommendation on the county equitable share to be set at Kshs465 billion is informed by consideration of the prevailing economic conditions in the country such as general economic performance, expected revenue inflation factors, among others. Further, the Committee took into account the non-discretionary expenditure from the national Government priorities expected to be implemented by the counties. Mr. Speaker, Sir, the Ksh465 billion is based on the approved Division of Revenue Act No.7 of 2024, which contained an allocation of Ksh400.01 billion, adjusted by an inflation factor of about 4 per cent bringing that figure to Ksh416 billion. This normally covers the additional growth in shareable revenue and general inflation in the economy. On top of this, the committee added the following non-discretionary expenditure to be borne by counties as follows- The impact of Housing Levy, which is legislation passed at the national level that has a direct impact on the counties, amounting to Kshs4.1 billion; Contributions to National Social Security Fund (NSSF) which was enhanced, that translates to about Kshs6 billion. In addition to that, we have the matching allocation on county aggregation industrial parks, which is a national Government priority project meant to improve the market situation within the country, amounting to Kshs11.8 billion; matching allocation to Community Health Promoters (CHPs) which was a pronouncement of the national Government, which is shared on 50-50, amounting to Ksh3.23 billion; An annual wage The electronic version of the Senate Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Director, Hansard and AudioServices, Senate."
},
{
"id": 1527701,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1527701/?format=api",
"text_counter": 105,
"type": "speech",
"speaker_name": "Sen. Ali Roba",
"speaker_title": "",
"speaker": null,
"content": "increment in the Integrated Personnel and Payroll Database (IPPD) system, which happens automatically, amounting to Kshs6.3 billion cumulatively for the 47 counties; and basic salary increment as per the Doctor’s Collective Bargaining Agreement (CBA) 27/2021 execution of return to work formula of Kshs3.5 billion, all totaling to an extra Ksh34.9 billion, which is required to be financed by the counties. At this juncture, allow me to bring to the attention of the Senate that from the time we suffered COVID-19 pandemic, shareable revenues to county government have stagnated. For two financial years, it remained at Kshs370 billion. Then there was a marginal adjustment that moved it to Kshs385. The only reasonable movement upward was when we proposed Kshs400 billion. That was later, through an amendment to the Division of Revenue Act, brought it down to Kshs387.7 billion, meaning the county governments for approximately almost four to five years have not realised any substantive revenue increase, while the revenues of Government have continuously performed well in terms of increment year after year, which justifies the position that we as the committee recommend for the House to adopt. Further, it is expected that the sharing of equitable revenue among counties in the Financial Year 2025/2026 shall be used based on the proposed fourth basis of revenue sharing, which based on the controversies that crowded the third basis of revenue sharing in this same Senate, we envisage a challenging situation ahead. Based on that, the committee in its wisdom has proposed Kshs14 billion to cushion all counties from the transitional effects of the new basis of revenue sharing. All these add up to Ksh465 billion and hence the committee recommends the House adopt this county equitable share for the Financial Year 2025/2026. Mr. Speaker, Sir, finally, I appreciate all stakeholders who appeared before this committee other than our traditional stakeholders, we have engaged with 13 constitutional commissions and two independent bodies for the first time. I extend our appreciation to the Members of the Committee of Finance and Budget who had to endure long hours to be able to engage with these strategic stakeholders to take the input. I also wish to appreciate your office and that of the Clerk for facilitating committee activities flawlessly without any itch. Mr. Speaker, I request hon. Senators to approve the committee's report on the 2025 Budget Policy Statement (BPS). As I move, I wish to request Sen. (Dr.) Khalwale, to second."
}
]
}