Budget 2021/22: Highlights of Kenya’s Spending Focus Amid COVID-19 Crisis

  • This economic outlook is worse than what was witnessed during the 2008 – 2009 global financial crisis

The 2021/22 budget making process in Kenya is here. Assailed by the Covid-19 pandemic, the next financial year’s budget presents a chance for the Government to turn hard-learned lessons from the global crisis into an enduring practice of linking strategy to value. Here are some of the highlights that you need to know.

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The country has a policy document that sets out the broad strategic priorities and policy goals to guide the National Government. This is the Budget Policy Statement (BPS). It basically guides the County Governments in preparing their budgets for the subsequent financial year and over the medium term.

Kenya’s economy has not been spared by the Covid-19 pandemic which has seen containment measures devastating global economies while also disrupting businesses and livelihoods in unprecedented levels. The post-lockdown economic outlook is slowly unravelling with many businesses in distress.

The 2021/22 budget theme of “stimulating the economy to safeguard livelihoods, jobs, businesses and industrial recovery” clearly shows the priority key in shoring up the economy from Covid-19 hit.

The Budget Policy Statement contains an assessment of the current state of the economy, the financial outlook with respect to the Government revenue, the proposed expenditure ceilings for the National Government, the fiscal responsibility principles and financial objectives as well as Statement of Specific Fiscal Risks.

The effects of Covid-19 pandemic have led to a slack in the economy. Looking ahead, however, the economy is projected to recover and grow by about 6.4 percent in 2021 and above 6.2 percent over the medium term.

The global economy contracted by 4.4 percent in 2020 and it is expected to grow by 5.2 percent in 2021. This economic outlook is worse than what was witnessed during the 2008 – 2009 global financial crisis.

“As we finalize the budget for the FY 2021/22 and the medium term, I wish to emphasize that resources are limited while at the same time, the Government is confronted with significant expenditure demands, including financing the post Covid-19 economic stimulus programme and the “Big Four” agenda.

“This calls for proper prioritization to ensure that we focus on critical expenditures with the highest positive impact on the well-being of Kenyans,” Julius Muia, the Treasury Principal Secretary says in the document.

The reduction in food prices led to a lower inflation rate of 5.6 percent in December 2020 as compared to 5.8 percent in December 2019. This remained within the Government target range of 5±2.5 percent.

Despite the uncertainty brought by the Covid-19 pandemic, the foreign exchange market has largely remained stable but partly affected by a significant strengthening of the US Dollar in the global markets.

Tea production, cane deliveries in Kenya’s sugar belt, milk intake and fruit exports have supported the agriculture sector. It has noticeably recorded an improved growth of 6.4 percent in the second quarter of 2020 compared to a 2.9 percent upswing in the corresponding quarter of 2019.

The agriculture sector contributed to GDP growth from 1.5 percentage points in the second quarter of 2020 to 0.7 percentage points over the same period in 2019.

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