The Only Budget Analysis You Will Need To Read To Be Very Informed. Takes Less Than 5 minutes To Grasp
As predicted in my pre-budget post, the budget turned out to be a campaign re-election tool for the President and his men and women. This is bad news for Kenyans because whenever politics enters something (anywhere in the world) the result is the same. It become short on substance and high on rhetoric and hype or in other words "hot air."
One key issue in budget 2006 will affect Kenyans this financial year. Finance Minister Amos Kimunya's budget indicates that the government is intending to raise Kshs 29 billion ($402.8 million) from domestic borrowing.
Compare this projection to last year's actual figures where it was set at 25 billion ($347.2million) but how much did the government end up borrowing locally? A slightly more than a staggering 38 billion ($527.8 million) That's well over 50 % above the intended figure.
This means that this year's estimate is a joke. Maybe to use nicer language, this year's figure is part of the Narc Kenya PR and re-election campaign strategy.
The truth is that the government will borrow much more than projected, the effect is that there is bound to be lots of inflationary pressures and also pressure on interest rates. This is bound to have an impact sooner or later on the current strength of the Kenya shilling against major world currencies. Just the sort of scenario that is quite the norm in Kenya in an election year.
Chris, Once again I comment long after you have blogged.
ReplyDeleteDomestic borrowing is preferable to donor funding, I dont know what your stand is on that but this is a welcome move considering the CBK lowered bank rates and therefore we had a situation of excess liquidity with inflation hitting 10%. Now the Govt can get this money back not by squeezing the banks but by selling bonds and using this money for govt expenditure and projects.
My only hope is that it is spent wisely .
Thanks for your useful comment Ken.
ReplyDeleteI agree with you that domestic borrowing is always better than borrowing overseas. However my point here is that government spending is already too high and the Kibaki administration are bound to borrow much more than projected especially as we prepare for the general elections.