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Economy

Kenya’s Budget is Beyond Reach, World Bank Warns

Kevins Jerameel

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Kenya's President Uhuru Kenyatta and His Deputy Dr. William Rutto

Kenya has been advised to initiate realistic budget projections; the World Bank has told the National Treasury. In the latest publication of the country’s Economic update, the world bank called for credible adjustment measures by government to place fiscal accounts back on the fortification path.

According to the latest figures from Treasury, Kenya’s fiscal deficit has shot up significantly to 7.7% against a projected target of 6.8% for the concluded 2018/19 fiscal year. Subsequently, the slippage has resulted into an increase in public debt to Ksh 5.89 trillion as of June from 5.03 trillion.

Recently, the national Assembly approved Treasury’s request to increase the country’s debt ceiling to Kush 9 trillion in what is expected to give room for more borrowing. The sudden shift of fiscal stance may signal shifting goalposts; World Bank Kenya Chief Economist Peter Chacha reckons such deliberation remain key in resetting the government budget processes back into reality.

“Fiscal consolidation should be an outcome of a realistic revenue projection and a well anchored expenditure position to ensure our debt remains sustainable,” he said. We would recommend capacity building in the public debt management office (PDMU) to evaluate our debt portfolio and make necessary interventions to certain debt,” Chacha added.

The government has already initiated tumultuous austerity measures which parliament is divided over. This even as the Ukur Yatani – led Treasury said we will see an estimated Ksh 131 billion out of the2019/20 financial spending directed to the Big 4 agenda.

Treasury has also indicated plans to review downwards Kenya Revenue Authority (KRA) targets for the financial year in realization of the over ambitious revenue mobilization plans. In its latest findings, income taxes represented the highest shortfall equivalent to Ksh 56.8 billion as the KRA came up against reduced corporate investments and frustrations in implementing revenue yielding measures including withholding taxes on winnings.

The government is expected to face the immediate squeeze of debt servicing obligations as the ration of interest and principal payments weigh hard on current count receipts. Meanwhile 43% (Ksh 1.24 trillion) of all domestic debt is expected to mature in the next one year imposing significant fiscal pressures.

To live up to the billing, the World Bank has recommended for the re- calibration of all debt towards longer and cheaper terms which would in effect require the government to sink back into the debt market.

Kenya has seen a steep decline in its composition external debt from multilateral institutions as the composition of commercial financing edges up.

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Banks

Co-Op Bank Profit Grows to Ksh 10.9B in Nine Months

Georgina Korir

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Cooperative Bank Group has reported a Ksh.10.9 billion profit for the third quarter in 2019 representing a 5.8 percent jump in earnings by the lender to the close of September.

The lender which is the third largest by assets in the region, said the growth was driven by its “soaring eagle” transformative agenda that has retooled and equipped the business with added competitive advantage.

The increased issuance of digital loans which serve to raise income derived from fees and commissions have played a major role in the growth in earnings by the bank. Digital loan issuance on MCo-op Cash is rising ahead of the bank’s traditional loan book to Ksh.27.6 billion as the lender’s non-funded income has surged forward by 33 percent to Ksh.14.1 billion

The group’s total operating income grew by 9% from KSh 32.3 billion to KSh 35.2 billion while its total assets grew 9% to KSh 440.8 billion compared to Ksh 404.2 billion in the same period last year.

Nevertheless, Co-op retained its likeness for the Treasury, a departure from observed exits by peers, to increase its investments in the portfolio by a further 13 percent to Ksh.94.6 billion from Ksh.83.2 billion last year.

In spite of the prolific growth of both net loans and advances to customers and deposits, Co-op’s net interest earnings slightly tumbled. While the lender has grown its neighborhood-based banking agents to 16,000, 90 percent of the bank’s customer transactions already sit outside branches.

As gross non-performing loans (NPLs) rose to Ksh.30 billion from Ksh.29 billion, the lender’s operating expenses picked up by a notable 11 percent on the back of higher loan loss provisions

The bank expects to keep by the diversification tune to strengthen its dominance on its core market segment encompassing retail banking and the cooperative movement.

Co-op Group Managing Director Gideon Muriuki reported that “the group continues to leverage on the benefits of the transformation agenda which has re-tooled and equipped the business with added competitive edge as reflected in the sustained growth in market share across all market segments.”

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Economy

Austerity Fails to Contain Public Spending Spree

Kevins Jerameel

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Kenya's acting Treasury cabinet secretary Ukuru Yattani

Despite freezing new development projects, instituting budget cuts and a freeze on hiring, the National Treasury was unable to tame State expenditure. Budget outlook paper recently published by the Treasury shows it only managed to save Sh149 billion by mostly cutting on pension, operations and maintenance.

Treasury managed to save Sh39.3 billion on development spending, confirming doubts that it could not renege on project commitments after President Uhuru Kenyatta announced that all new projects would be frozen until ongoing ones are completed in July.

The treasury had estimated that hundreds of billions would be freed up by the order but ended up splashing Sh 300 billion on projects. The budget assessment shows that the Government saved Sh13 Billion on pension following an exercise to weed out ghost retirees.

Even as the government made efforts to cut spending, revenues fell further by Sh123.5 billion, cancelling out the gains and pushing the treasury to borrow Sh 721 billion from a target of Sh650 billion. The Treasury has this year again announced new round of budget cuts on non-essential items like trips, training and car expenses but many feel this may be cosmetic in terms of delivering an affordable budget. When governments run out of money to spend and room to borrow, they either find new avenues to raise taxes or cut expenditure.

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Economy

2000+ Pastoralists Missed out on New Currency Swap as they Grazed in Witu and Boni Forests

News Team

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Over 2000 pastoralists did not exchange their Sh 1,000 notes as they had traveled to remote areas in search for pasture for their animals.

Some herders who just returned home last weekend are trying to seek help from the Central Bank by appealing for a short window for them to swap the old notes for the new currency. The pastoralist claims that they were unable to beat the 30th September deadline as they were grazing in the highly remote areas of Witu and Boni in Lamu.

After returning home last weekend, the herdsmen claim they found the sh1000 notes in their possession were almost useless when they reached trading centers over the weekend to make purchases. According to them, retailers took extreme advantage of them trying to unfairly trade the cows with less money so that the herdsmen could acquire possession of the new currency. To add on this, the herders claimed that the same unfair traders were going into the wilderness to trade for the cows with other herdsmen still in the dark with whatever is going on.

The herders claim that about 2000 pastoralists are still in the wilderness grazing their livestock and in darkness of the changes which had been going on in the urban areas. The herdsmen explained that they had left home earlier in February and had absolutely no way of communicating with other people to know what was on going.

The herdsmen are now appealing to the governor of the CBK Patrick Njoroge to open up a small window of opportunity for them to make a swap. The herdsmen explained that they are organized into different groups in different areas but that they have leaders who can clarify on who belongs where for transparency in the dealing to save them from the losses they are currently incurring.

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