The Following are highlights from the 2015/16 budget speech by Kenyan Finance Minister Henry Rotich.
The financial year starts on July 1.
The budget announcement is coordinated with other nations across the East African Community, which also includes Tanzania, Uganda, Rwanda and Burundi.
The minister said economy growth was 5.3 percent in 2014 and was expected to be between 6.5 to 7 percent in 2015, with the same pace continuing in the medium term. He said growth and employment prospects remained favourable.
SPENDING, REVENUE AND DEFICIT
“We are targetting revenue collection at the rate of 1.358 trillion shillings ($13.99 billion), equivalent to 20.8 percent of GDP,” Rotich said.
“In financial year 2015/16, overall expenditure and net lending are projected at 2 trillion shillings, or 30.7 percent of GDP,” he added.
“Reflecting the projected expenditures and revenues, the overall fiscal balance including grants (amounting to 73.4 billion shillings), is projected at 570.2 billion shillings(equivalent to 8.7 percent of GDP) in fiscal year 2015/16.”
Rotich said that, excluding the expenditures related to a standard gauge railway project, the overall deficit would decline to 426 billion shillings, equivalent to 6.5 percent of GDP.
“Tackling insecurity decisively is the top priority of the government strategy to sustain growth momentum of the economy while creating jobs and reducing poverty on a sustainable basis.”
“Without achieving security for our citizens, achieving our growth and development objectives will remain a mirage.”
The minister said the shilling currency had been under pressure by a range of factors including the global strength of the dollar and some “speculative behaviour.”
He said the central bank’s decision to raise interest rates to 10 percent from 8.50 percent this week, foreign exchange reserves in excess of $7 billion and additional funds available via an International Monetary Fund facility should stabilise the currency.
BUSINESS AND INVESTMENT
“We have significantly improved the business environment, rolled out the biggest infrastructure in Kenya’s history – the standard gauge rail, completed key programs in the roads and energy sector and brought down the cost of living.”
The minister said the construction of the new railway, initially to run from Mombasa to Nairobi, was progressing well and ahead of schedule. He said this stage of the project would completed around mid-2017.
“Reducing the cost of doing business and encouraging private sector innovation and entrepreneurship and business expansion is a key prerequisite to achieving strong and sustainable economic growth and poverty reduction.”
He said the government was implementing a business regulatory reform strategy to raise Kenya’s ranking in the World Bank’s Doing Business indicators.
“The government will also implement additional measures to further deepen and strengthen the financial sector. In particular, in 2015, the Nairobi International Financial Centre Authority will be made fully operational.”
CAPITAL GAINS TAX
“I propose to remove the 5 percent tax on capital gains arising from the sale of shares and introduce a 0.3 pct withholding tax on transaction value.”
CORE CAPITAL REQUIREMENTS
“I am proposing to increase the minimum core capital for banks, mortgage finance companies and insurance companies.”
The minister said he was proposing to increase the minimum core capital requirement for banks progressively from 1 billino shillings to 5 billion shillings by December 2018.
($1 = 97.0500 Kenyan shillings)