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Development spending, counties hit hard by Sh55bn budget cut

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Economy

Treasury secretary Henry Rotich. FILE PHOTO | NMG 

Development projects are the most affected in the Sh55.09 cut in the budget proposed by the Jubilee administration to fill the hole left following changes to proposed taxes including halving of 16 per cent levy on petroleum products.

Treasury secretary Henry Rotich has slashed development budget by Sh34.33 billion in the mini-budget to be debated by the National Assembly tomorrow, dimming economic growth prospects and slowing down creation of new job opportunities.

Project spending for the year ending next June is set to drop Sh642.90 billion from initial Sh677.23 billion.

The proposals will affect capital projects not directly related to the ambitious Big Four plan, which covers manufacturing, affordable housing, universal healthcare and food production.

The expenditure plan, if approved by the National Assembly, will see the Treasury spend Sh227.72 billion more on servicing the rising public debt than what State ministries, departments and agencies will spend on development projects.

The biggest losers in the development budget cut are departments for gender affairs and petroleum whose spend has been shaved by Sh2 billion and Sh1.5 billion, respectively.

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“Pursuant to the provisions of the Constitution and the PFMA (Public Finance Management Act) 2012, the Cabinet Secretary has received the amendments of the Finance Bill from Parliament amending some tax measures which have financial implication on the budget estimate,” Mr Rotich says.

“As a result we have prepared supplementary estimates No. 1 of FY 2018/19 rationalising the expenditure to the extent of the revenue shortfall due to amendments in the Finance Bill approved by Parliament.”

Allocation to counties have been reduced by Sh9.04 billion to Sh304.96 billion, a move likely to hit non-priority devolved functions.

Overall, the 2018-19 budget has been cut to Sh2.97 trillion from Sh3.03 trillion initially.

The Parliament has been the hardest hit with Sh5 billion budget shave in the overall budget to Sh31.83 billion.

This comprises Sh2.65 billion cut in National Assembly budget to Sh19.21 billion and Sh2.35 billion for Parliamentary Service Commission to Sh12.62 billion.

“The resources are extremely scarce,” Treasury PS Kamau Thugge said last Thursday, emphasising that every ministry or department will have to justify the Big Four component for very it requests from the Treasury.

“We have quite significant amount of non-discretionary expenditure that has to be funded.”



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The pillars that will deliver trade dividends within EAC

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The pillars that will deliver trade dividends within EAC


East African Business Council (EABC), CEO Peter Muthuki. NMG PHOTO

Peter Mutuku Mathuki took over as the secretary-general of the six-nation East African Community (EAC) bloc on April 25, pledging to deliver a “stronger and more formidable” trading bloc at the end of his five-year term. Dr Mathuki (right) is not new to regional integration issues.

He served in the East African Legislative Assembly (EALA) for five years to 2017 before taking reins as chief executive of East African Business Council (EABC) — the regional business lobby for private sector — from October 2018 until his latest appointment. He spoke to Business Daily.

HOW HAS YOUR EXPERIENCE AT THE LEGISLATIVE ARM OF THE EAC AND LATER AS A CHAMPION OF PRIVATE SECTOR INTERESTS PREPARED YOU FOR YOUR NEW ROLE?

I have gained experience and a sound understanding of regional politics and its effects on regional integration, business and individual countries.

Having worked in different capacities under the umbrella of the EAC, I am well aware of the opportunities that are available for exploitation, as well as the challenges that the Community and individual partner States face.

I will use my experience, and valued partnerships that I have picked along the way to work towards creating a more integrated and stronger Community that is able to withstand the challenges to come.

ONE OF THE BIGGEST THREATS TO REGIONAL INTEGRATION IS ON-AND-OFF DISPUTES AMONG MEMBER STATES WHO SOMETIMES RESORT TO ERECTING TARIFF AND NON-TARIFF BARRIERS (NTBs). HOW ARE YOU GOING TO ADDRESS THIS CHALLENGE?

My preferred approach would be to prioritise the full operationalisation of the EAC Elimination of Non-Tariff Barriers (NTBs) Act, 2017 and the establishment and full operationalisation of the EAC Committee on

Trade Remedies to handle persistent trade disputes in the region. I will also focus on strengthening the capacity of the National and Regional Monitoring Committees on the resolution of NTBs to identify and resolve any imposed NTBs.

The removal of NTBs is expected to drive intra-regional trade to at least 30 percent in the short-term from the current 15 percent. My target is to have it grow to more than 50 percent by the end of my tenure.

WE HAVE LARGELY SEEN INDIVIDUAL MEMBER STATES ENGAGE TO RESOLVE DISPUTES BETWEEN THEM, WITH LITTLE INVOLVEMENT FROM THE EAC SECRETARIAT. HOW DO YOU PLAN TO HANDLE THIS?

My aim is to strengthen the Secretariat to better support Partner States in trade negotiations and in operationalising mechanisms to unlock disputes among themselves. The EAC Elimination of NTBs Act, 2017, shall facilitate the resolution of persistent NTB and force Partner States to refrain from imposing new ones.

The mechanisms to report and resolve NTBs, as stipulated in the NTBs Act 2017, include compensation where the Council (of Ministers) finds that the imposing Partner State caused unnecessary trade loss to the affected Partner States as shall be determined by the Committee on Trade Remedies. It is my goal that this Committee is established and empowered to deliver on its mandate.

My other key area of focus on this is to strengthen the available dialogue with Partner States through their established National Monitoring Committees and the Regional Monitoring Committee on the resolution of non-tariff barriers — where such exist — and other inconsistent laws that frustrate intraregional trade and investments.

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KENYA, BEING THE ONLY LOWER MIDDLE-INCOME COUNTRY IN THE BLOC, HAS RECENTLY FOUND ITSELF ISOLATED WHEN NEGOTIATING FOR INTERNATIONAL TRADE TREATIES WHERE ITS EXPORTS WERE FACING INCREASED TARIFFS IN ABSENCE OF A DEAL. CASE IN POINT WAS THE RECENT POST-BREXIT DEAL WITH THE UK AND BEFORE THAT IT WAS WITH THE EU BACK IN 2016. WHAT IS THE LONG-TERM SOLUTION TO THIS?

The EAC has an obligation to implement all the provisions of the EAC Treaty, its protocols as well as decisions and directives from the EAC policy organs.

In terms of the EPAs (economic partnership agreements), the EAC Summit has provided guidance whereby partner States that are ready to implement the agreement should go ahead and do so.

Therefore, it is expected that within the confines of the EAC Treaty, we have solutions to fast-movers like Kenya.

On a sustainable basis, however, all EAC economies will be assisted to grow to middle-income status through harmonised economic policies.

When each of the EAC partner States has something to sell to the new negotiated markets on a competitive basis, negotiation and implementation of trade preferences will be a very welcome idea to all the partner states.

WHAT PRACTICAL SOLUTIONS ARE YOU BRINGING ON BOARD TO UNLOCK THE LONG-STANDING STALEMATE AMONG EAC MEMBERS OVER THE COMMON EXTERNAL TARIFF (CET) FOR THE BLOC?

The finalisation and comprehensive review of the common external tariff and its uniform application in the bloc is long overdue. One of my priorities is to work with the Secretariat and partner States to fast-track the process by the end of this year. We will do this by ensuring that all member states focus on its conclusion for the purpose of promoting local industries and products in each of the partner states.

Despite a legal framework for standards in place, there have been cases where goods from one member State has been subjected to double testing and standardisation, and that means increased cost of doing business.

The Standardisation, Quality assurance, Metrology and Testing Act 2006 provides a framework for mutual recognition of test certificates and product certification marks. There is a need for capacity building in all the partner States to adopt and implement the mechanisms in place to enhance intra-EAC trade. It is also necessary to deliberately engage with the private sector, development partners and regulatory authorities, including national standards bodies. This will help to, among others, adopt risk-based standards development and conformity assessment to address the issues of unnecessary costs and burden to the traders in this area.

HOW DO YOU PLAN TO RESOLVE THE PERSISTENT RECURRENT BUDGET CHALLENGES at THE SECRETARIAT?

This is an issue which has affected the performance of the Secretariat in the past. Going forward, we plan to address this by encouraging partner States to make their remittances on time and coming up with sustainable solutions to those that may be facing challenges in doing the same. We shall also revisit the alternative financial mechanism once proposed so as to enable EAC to collect its own expenditure money from taxes on imported goods.

WHAT LEGACY WOULD YOU LIKE TO LEAVE BEHIND?

The focus of the EAC has been and continues to be regional integration among partner States. It is my goal that by the time my tenure draws to a close, we will have a stronger, more formidable Community that benefits all its citizens politically and from a business perspective.

The Community is also expanding, Somalia has applied to join the bloc and we are fast-tracking deliberations with the hope of reaching a conclusion later in the year. The DRC is also in the process to join the Community. Our plan is to work to create an EAC that becomes a global player of repute while meeting the needs of its citizens.

[email protected]

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Hotels target regional meetings to aid tourism sector recovery – KBC

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Kenya’s tourism and hospitality industry stakeholders are targeting the East Africa Community market for meetings, incentives, conferences and exhibitions (MICE) market to jumpstart the sector badly hit by COVID-19 pandemic.

The industry targets an estimated 29 million middle class people in the region for MICE which has been clamped down as a result of social distancing measures.

Kenya Coast Tourism Working Group Chairman Hasnain Noorani said players in the sector are working on a new pricing model as existing packages seen as too expensive for the target group which forms 22.6% of the region’s employed population according to a recent report by the African Development Bank (AfDB).

We are working together with players in the local tourism and hospitality industry to develop offers that will attract regional and domestic tourists as well, as we try to help the sector recover,” said Noorani.

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Noorani who also doubles as Managing Director for PrideInn Hotels said the tourism industry is confident the strategy will reap benefits before tourists from the international markets begin to arrive when Corona virus pandemic subsides globally.

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At PrideInn hotels for instant, we are having continuous product innovation, favorable pricing for the domestic market products, digitization of the MICE sector and gaining the trust of travelers through prioritizing their health and campaigns to re-assure the world that Kenya is safe,” Hasnain stated.

As with the majority of COVID-19-related adaptations, it remains to be seen whether changes in the MICE segment will remain once the health threat has subsided.

A swift pivot to online platforms can virtually bridge some of the interactive gaps caused by restrictions on mass congregations, and should therefore help to soften the blow of COVID-19 on the MICE segment,” said Hasnain.

Amid global travel restrictions, social-distancing protocols and prohibitions on mass gatherings, the world’s meetings, incentives, conferences and exhibitions (MICE) segment has been forced to adapt to the pandemic, with some events shifting online and others being deferred.

Before the outbreak of the virus and the subsequent introduction of travel restrictions and social-distancing guidelines the MICE segment presented a promising growth avenue for emerging markets seeking to diversify their tourism offering.

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Kenyans abroad sent home Sh32bn in April – CBK

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NAIROBI, Kenya, May 18- Kenyans living abroad sent home Sh32 billion (USD 299.3 million) in April 2021, a new data show.

Data by the Central Bank of Kenya reveals that the inflows represent a 43.7 percent increase from remittance sent in April 2020 and 2.9 percent rise in March 2021.

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“Remittance inflows increased to USD 299.3 million in April 2021, from USD 208.2 million in April 2020, representing a 43.7 percent increase and 2.9 percent higher than the remittances in March 2021,” said CBK in its weekly bulletin.

The cumulative inflows in the 12 months to March 2021 totalled USD 3,308 million compared to USD 2,801 million in the same period in 2020, an 18.1 percent increase.

The United States continues to be the largest source of remittances into Kenya, accounting for 57.2 percent of remittances in April 2021.

Diaspora inflows have remained Kenya’s largest source of foreign exchange since 2015.

In 2020, Kenyans abroad sent home Sh341 billion defying the pandemic odds.

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