Kenya defense spending cut 18 per cent in 2012/13 budget: analysts

Xinhua
Tuesday, June 12, 2012

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Kenya’s defense spending has been cut by 18 per cent from 935 million U. S. dollars in 2011/ 12 to 762 million dollars in the 2012/13 budget despite the continuing war against militants in Somalia and cross-border insecurity, analysts said here on Monday.

"We see the budget policy statement clear on priority sectors—agriculture, energy and Information, Communication and Technologies (ICT) -- but very poor on the budgetary allocation," Sammy Onyango, the Deloitte East Africa’s chief executive, told journalists ahead of Thursday’s budget unveiling.

Kenyan troops crossed into southern Somalia in October 2011 in the hunt for Al-Shabaab militants after a series of armed raids on the Kenyan soil, which threatened to stall the country’s tourism industry.

Onyango said cross-border insecurity persisted despite the 18 percent defense cut, while the Operation "Linda Nchi", meaning to make Kenyan borders safe from insecurity threats, is still continuing.

The cost of administration is also set to rise due to the setting up of new governments in 47 counties.

Kenya’s Defense Ministry officials said they were not aware of the proposal to reduce the defense spending in the current budget.

"We are not aware of this proposal and we cannot comment on it at this moment. We would be able to speak when we have the exact details," Department of Defense Operations Information Officer Colonel Cyrus Oguna told Xinhua.

Kenyan troops in southern Somalia have been reduced by 750 to create room for the deployment of a battalion from Sierra Leone.

According to Deloitte East Africa’s analysis of the budget estimates to be released in parliament, the development expenditure will decrease massively while the recurrent expenditure is expected to rise to 9.3 billion dollars in 2012/ 13 against 4.4 billion dollars for development spending.

The key sectors of health and agriculture are expected to receive improved allocations, but there were fears the failure by the ministries involved to utilize funds set aside for irrigation was a setback.

"Africa has not exploited agriculture.

"The Maputo Declaration of 2003 required a spending average of 10 percent of the gross domestic product (GDP) on agriculture," Onyango said.

Deloitte, a global firm which offers professional consultancy services, including accounting and tax advisory services, also called for reforms of the tax system in Kenya to attract investors.

The government should widen the tax net to enable it reduce the massive budget deficit expected in the 2012/2013 fiscal budget set to be unveiled in parliament Thursday.

Nikhil Hira, Deloitte East Africa’s tax leader, said the budget could be much harder to finance unless the tax net was expanded and a lower corporate tax rate introduced for small and medium firms.

"The problem I have with increasing this spending sit that we have not really worked how we are going to finance it.

"Even in the current estimates, 50 to 60 per cent is going to be financed by Kenyans, the rest will come from borrowing," he said.

Hira called on the government to consider removing the tax incentives which have had a bigger impact on the revenue collection, but have not helped the economy to achieve the desired economic impact.

He said the East African nation should come up with a new income tax law as the current it is out-of-date after being in the place for the last 40 years.

"We should start with a blank piece of paper.

"Because the danger is taking what we have and try to work around it, we will still end up with ambiguous and unclear legislation," he said.

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