KENYA`S BUDGET - 2011/2012

The Minister for Finance read his ministerial statement (read budget) on Wednesday,as did all the other EAC countries, was the biggest in terms of value in Kenya´s history. This year´s budget themed:

´Building Resilience and Sustaining Inclusive Growth for a Prosperous Kenya´, 

the budget stood at Kshs.1.155T but the bulk of it was on net recurrent expenditure standing at Kshs.474.2 9B or 41% of the total, Consolidated Fund Services recurrent expenditure amounts to Ksh.209.5 B or 18%while development is pegged at Kshs.398.6B or 34%.


The major expenditures were as follows:

• Kshs.221.4B for infrastructure development with Kshs.100.9B being allocated to the construction of roads;
• Kshs.100B for Agricultural development and agro-processing for value add in exports;
• Kshs.64B is set aside for health with Ksh.6.6B will be channeled toward enhanced immunization coverage throughout the country ;
• Kshs.2B for high impact security intervention;
• Kshs.65.7B has been allocated for the energy sector with Kshs.15.6B on expansion of national transmission system, Kshs.16.1B on geothermal development and Kshs.5.6B on rural electrification programme;
• Kshs.20.8B on the implementation of the new constitution which include setting up constitutional offices; drafting of new laws; judicial reforms, expansion of Parliament facilities, and preparation of the next elections; Ksh.1.5B for salaries for constitutional office holders, Ksh.9.3B for judiciary and Ksh.2B to cater for emerging requirements for constitution-related expenditures. ;
• Kshs.8.1B for the national Assembly;
• Kshs.12.1B for the IIEC;
• Kshs.17.2B for CDF with another Ksh.1.8B as arrears owed to the CDF, bringing the total allocation to CDF to Ksh.19 billion , an additional grant of Ksh.3.7B toward completion of the on-going projects under education, health, water and sanitation, in readiness for handing over to the new country government ;
• Kshs.10.2B for irrigation through out the country, Kshs.8.6B under treasury and Kshs1.6B under National Irrigation Board;
• Ksh.53.2B in tertiary education, Kshs.8.25B for Free Primary Education and Kshs.18.5B for Free Day Secondary Education, and Ksh.1.67B for free school feeding programme ;
• Kshs.3.3b for development of the New Standard Gauge Mombasa-Kampala line and Kshs.2.9B set aside for urban Rail system in Nairobi;
• Kshs.17.3 B for LATF;
• Kshs.1.8B for Kenya Youth Empowerment Project (KYEP) , Kshs.1B to boost the SME fund;
• Ksh.4.2 B spent on IDP resettlement.

The major revenues are as follows;

• Total revenue target is Ksh.787.6 comprising of Ksh.713.6B of ordinary revenue and Ksh.75.9B of appropriations-in aid;
• Ksh.41.1 B in external grants;
• Ksh.116.7B foreign financing and Ksh. 119.5 B domestic market borrowing.

Tax Proposals

• Aseptic plastic bags shall be granted duty remission and imported at the rate of 10% instead of a Common External Tariff (CET) rate of 25% ;
• Imports duty on animal and poultry feeds zero rated (0%);
• Duty remission on inputs for the production of solar panels ;
• Battery operated vehicles will be duty exempt ;
• Exempt from paying import duty apron buses used at the airside ;
• Vehicles and equipment imported by Kenya police shall be exempt from import duty, security equipment such as hand held metal detectors, CCTV cameras, bomb detectors, under carriage walk through metal detectors and under carriage mirrors will also enjoy duty exemption ;
• Law amendment to make it mandatory for issuers of simcards to ensure registration before activation for use by their subscribers ;
• Amendment of the Banking Act to require the Central Bank to formulate guidelines to allow banks to enter into arrangements with banks outside Kenya to offer limited banking services to Kenyans while abroad ;
• Amend both the Banking and Microfinance Acts to allow for credit information sharing by institutions licensed under the two Acts ;
• Amend the Microfinance Act to prohibit institutions which obtain approval from the Registrar of Companies to use the words “Deposit Taking Microfinance” in their business name from commencing deposit taking business before being issued with a deposit taking license by the Central Bank ;
• Amend the law to remove the requirement for appointing fund managers by schemes that invest all their funds in guaranteed fund ;
• Amend the Capital Markets Act to facilitate introduction of an Over the Counter Market for bonds ;
• Amend the Capital Markets Act to allow for the introduction of a regulated commodity futures market ;
• Amend the Insurance Act to empower the Insurance Regulatory Authority to assume control over the assets of a financially troubled insurer ;
• Amend the Insurance Act to adopt a mortality table reflective of the Kenya experience ;
• Excise duty on kerosene removed;
• Stay of CET application to allow the importation of all types of rice at the rate of 35% instead of 75% for a period of one year ;
• Importation of wheat grain under the duty remission by gazetted millers at the rate of 0%, instead of 10%;
• Grant remission of duty for a period of six months on maize grain imported by gazetted maize millers at a duty rate of 0% instead of 50% as per the EAC CET ;
• Reduce import duty on food supplements from 25% to 10% ;
• Remove import duty on motor cycle ambulances ;
• Amend the PAYE rules to provide that an employee shall only qualify for one personal relief ;
• amend the Income Tax Act to exempt Real Estate Investment Trusts (REITs) from corporation tax in addition to exempting investors who receive dividends from REITs from payment of withholding tax ;
• Increase the withholding tax in respect of payments made to such professionals from 5% to 10% ;
• Harmonize the excise duty regime for cigarettes at Ksh.1,200 per mille or 35 percent of the retail selling price (RSP), whichever is higher ;
• Amendment of the law to allow the Government to enter into Tax Information Exchange Agreements ;
• Filing of returns by employees who have no other income and their PAYE has been paid to the exchequer by their employers abolished;
• Amend the Income Tax Act to give the Commissioner express powers to register such taxpayers.