Parliament on Thursday passed President Kenyatta’s proposal to reduce the VAT on petroleum products from 16 per cent to 8 per cent amid protests from some Members of Parliament who were opposed to the proposal and against how the vote was carried out.
The Controversial Vote
The memorandum on the Finance Bill 2018 required 233 majority votes for it to be rejected. There were only 215 members present during the vote.
According to the National Assembly’s Speaker Justin Muturi, the quorum allowed for the vote was not met. “The ‘No’ vote on [8% VAT on Fuel] was lost on the basis that they did not have the required number,” he said.
The Standard reported that the Majority Leader Aden Duale and John Mbadi orchestrated a walkout from the House that gave the President’s memorandum a win based on a lack of quorum.
Besides the fuel tax passing through, employees will now have 1.5 per cent of their gross income deducted for contributing to the National Housing Development Fund. In addition, Kenyans will now be charged a 20 per cent excise duty for money transfers.
Financing High Debt Levels and a Budget Deficit
In his national address last week, President Uhuru defended his memorandum stating that to maintain the progress on development, tough choices had to be made.
Supporting the memorandum, Duale said the VAT on petroleum products will enable the government to finance its main projects while delivering to Kenyans basic services. He also added that other countries such as South Africa, Ghana, and Nigeria charge VAT on petroleum products at 14 per cent, 15 per cent, and 5 per cent respectively.
The Finance Bill 2018 when signed will, therefore, reduce the country’s debt levels, address the budget deficits, and finance the government’s Big Four Plan.
Supplementary Budget Cuts
The Budget and Appropriations Committee (BAC) has reduced the total budget of this financial year by Sh37.6 billion and a reduction of the total recurrent expenditure by Sh9 million.
The budget for exploration and distribution of oil and gas has been slashed to Sh1.5 billion while the State Department of Infrastructure’s budget has been cut to Sh8.7 billion. Other budget cuts will affect country governments, the Treasury, the Ministry of Devolution, the National Assembly, and the Public Service Commission (PSC) among other entities.
On the other hand, the Judiciary received an increase of Sh1.5 billion in its budget which will see the arm of government proceed with plans to construct courts and speed up the hearing of corruption cases.
“The PSC proposal to reduce the parliamentary budget by a figure of Sh5 billion could have seen the entire budget affected by up to 40 per cent and that is why we have rationalised this, so that the austerity measures cutting across government is between 15 and 20 per cent,” the Chairman of the Committee Kimani Ichung’wa said.
The Budget Committee was reviewing the PSC budget which proposed a reduction of Sh55.1 billion to the budget.
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.