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With a few weeks to the end of the current financial year, the National Treasury has revealed something that will not go well with those who care for the general well-being of the economy.
Treasury is yet to release 35 per cent of the development budget to the national government and 30 per cent of development funds to counties.
Around Sh600 billion — around 20 per cent of the national budget — had been allocated for development both for national and county governments. This means some Sh200 billion will not be flowing into the economy this financial year.
In simple terms, there will be a budget shortfall of Sh200 billion this financial year. The repercussions of this will be hard hitting.
The development means a good chunk of all development projects — on-going and scheduled — by national and county government will not take place this financial year. Development projects are mostly capital intensive, such as road construction.
This trend has been ongoing for years and will get worse as Kenya’s expenditure continues to outstrip her revenues
The wort aspect is the multiplier effect that such a shortfall has on the overall economy.
In simple terms, the proportional effect of this budget deficit on the economy will be much bigger by the time it runs its course. The Sh200 billion direct deficit might end up creating a Sh600 billion gap in the economy.
The biggest casualties as usual will be those who do business with national and the county governments. Whilst such businessmen and women are used to delays in payments, this time, there will be no payment for their projects. Meanwhile, they have already incurred expenses.
The bigger picture is what this means to the growth of the country. No country in the world has ever developed without allocating money for development. It is bad enough our recurrent — money allocated for day-to-day expenditures — is already higher than development expenditure.
Another key concern is what this means for devolution.
With no money to develop and grow the infrastructure needed for devolution systems to flourish, the future of devolution itself is at risk.
The economics and real estate expert spoke to the Star
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