Monday, April 16, 2012

US-backed Somalia War Leaves Kenya With Sh12bn Budget Gap

Somalia war leaves Kenya with Sh12bn Budget gap

William Oeri | NATION

Supplementary estimates submitted to Parliament on Monday indicate that the Treasury is seeking an additional Sh12.5 billion “to meet increasing administration and planning expenses of the Kenya Defence Forces”, directly linking the item to the Somalia war.

Kenya’s seven-month long incursion in neighbouring Somalia widened the government’s Budget gap by a whopping Sh12 billion, a fresh report on the state of public finances has shown.

Supplementary estimates submitted to Parliament on Monday indicate that the Treasury is seeking an additional Sh12.5 billion “to meet increasing administration and planning expenses of the Kenya Defence Forces”, directly linking the item to the Somalia war.

Military spokesman Bogita Ongeri could not immediately confirm whether the Sh12 billion bill is part of the money Kenya expects to be reimbursed for its war effort in Somalia under a cost-sharing deal agreed with the United Nations early this year.

Kenya invaded Somalia last September after Al-Shabaab militants staged a series of raids inside its territory and abducted more than four foreigners whose freedom they tied to payment of ransoms.

Finance minister Njeru Githae is expected to table the Supplementary Budget Estimates in Parliament this afternoon. Overall, the estimates show a net increase of Sh11 billion in the national Budget.

The mini-budget, whose composition has also been largely influenced by recent strikes by civil servants, includes an additional Sh6.1billion to pay for recently enhanced teachers’ salaries and allowances and another Sh3.9 billion to pay for doctors’ emoluments.

The estimates however show that basic wages for temporary teachers will fall by Sh2.4 billion in the last three months of the current financial year.

Teachers won the expenditure concessions after a vicious battle with the government at the beginning of the third term last year that culminated into a nationwide strike called by Kenya National Union of Teachers (KNUT).

The strike was called to demand employment of 18,000 new teachers and an extra 5,000 this year.

More than 2,300 doctors and dentists went on strike late last year demanding a 300 per cent increment in their pay, which they claimed had not changed for more than a decade.

The action ended with a return to work formula that included gradual increase in the doctors’ salaries and allowances.

The Treasury made the concessions to the striking state employees despite its earlier promise to the International Monetary Fund (IMF) that it would free public wages for three years beginning 2012.

The IMF had in turn agreed to increase Kenya’s borrowing to $760 million from $500 million initially agreed in January 2011.

The supplementary estimates show that apart from the overall increase in expenditure, the Treasury has cut spending in key ministries to keep the budget in check.

Top in the list of ministries whose budgets have been cut is the Treasury itself, whose spending will drop by Sh9.9 billion in the next three months.

The cuts are mainly related to “capital grants to government agencies and other levels of government” as well as “domestic loans to financial institutions.”

The Ministry of Energy’s budget has also been cut by Sh8.6 billion mainly in money that had been earmarked for development.

The increase in government spending comes against a backdrop of increased domestic borrowing that currently stands at Sh3.4 billion above the target for the entire financial year.

Domestic borrowing hit Sh122.92 billion as at the end of last month, which is the third quarter of the financial year than runs from July 1 to June 30.

The Treasury said yesterday it had borrowed more to help state agencies meet their spending in the third quarter when a number of budgeted projects are due for completion.

The excess borrowing also took place against the lower-than-targeted tax and donor receipts.

“We have increased those amounts because we want to smoothen out the spending by ministries. There are many projects that are supposed to be completed by the end of the last quarter of the financial year.

Again, we have had lower tax and donor receipts,” said Henry Rotich, deputy director of economic affairs at the Treasury.

The newest figures shows government’s struggle to raise funds has only been fruitful with respect to domestic borrowing.

In terms of tax revenues, the amount collected by end of March stood at Sh453.1 billion by end of March or 66 per cent of the planned amount – even though three-quarters of the year has passed.

Donors were also not forthcoming with their commitments for the financial year having brought Sh18.54 billion by the end of March this year, 38 per cent of the amount targeted during the financial year.

Other revenues, including collections in the form of fees or fines collected by various ministries (also called appropriations-in-aid), was at Sh12.04 billion, well below the year’s target of Sh31.78 billion. That amounts to 38 per cent of the budgeted collections.

The borrowing helped government revenue grow to Sh630.64 billion, 71 per cent of the planned target for the fiscal year.

The other major cause of the increased flow of revenues to the exchequer came from a Sh24 billion in funds surrendered by various ministries which had not utilised them in the financial year 2009/10.

Since most of the targeted cash had already been raised in loans, analysts said that they did not expect much additional government borrowing during the rest of the financial year.

“The government is in the market for only Sh5 billion more this month, and we don’t expect it to go for much in the next two months,” said Poonam Vora, a research analyst at Dyer and Blair Investment Bank.

She said that the government could, however, take advantage of the interest by the market to raise money cash and then seeks to bridge any financial gap that may arise later with the cash.

“The government will probably not need much money during the rest of the financial year. It will still go to the market because of the need for redemptions and since the markets are liquid fund managers will still be keen to participate as long as there are good returns,” said Ms Vora.

Kenyans pay through the nose for war with Shabaab

By James Anyanzwa and Njiraini Muchira
The Standard

The war effort in Somalia and impending elections have pushed Government spending to new heights with Finance minister Robinson Githae seeking an additional Sh46 billion over the next two months.

The money will likely come from budget cuts to several ministries as the Government scrambles for cash to support Kenyan troops fighting Al Shabaab militants under the umbrella of the African Mission in Somalia at Sh7,000, but the Government believes this is money well spent. It has said the cost of inaction would be higher in the long run, citing the effect of piracy in the Indian Ocean on the price of essential imports.

Its stand has been supported by, among others, the Kenya Association of Manufacturers. This will be the second increase in the budget of the Ministry of State for Defense that runs the war in Somalia, after its allocation was raised by Sh7 billion in the current financial year.

After former Finance minister Uhuru Kenyatta presented a record Sh1.2 trillion budget last June, it emerged that the Government faced a huge deficit of Sh236 billion.

Also eating up a huge chunk of the proposed extra spending is the Independent Electoral Boundaries Commission (IEBC).

Most of the money will finance recurrent rather than development costs in Government and Githae, still fresh in his new docket, faces an uphill task to convince Parliament to sanction his request for more money.

Toughest battle

It could yet be his toughest battle before the current financial year ends in June.

According to the Supplementary Budget tabled in Parliament on Monday, the Ministry of State for Defence has been allocated a huge portion of the mini-budget.

The ministry received Sh12.5 billion for salaries and allowances, and to fund military operations against the Al Shabaab extremists in Somalia.

Kenyan troops are sweeping through areas of Southern Somalia controlled by the extremist Islamist group, al Shabaab.

The increased spending also comes at a time when countries in the East Africa region are engaging in an arms race.

So far MPs have made it clear that Treasury has been collecting illegal taxes proposed in the Finance Bill, which MPs have refused to pass until it is amended to cap interest rates.

Besides, Githae is left with only two weeks to present to Parliament the budgetary estimates for the 2012/13 financial year on April 30 in accordance with the Constitution.

Financing elections

In the supplementary estimates tabled on Monday, the minister plans to spend Sh20.5 billion and Sh25.4 billion on development and recurrent expenditure respectively until June 30.

This comes on the back of Sh1.2 trillion budget for the 2011/12 financial touted as one of the biggest in the country's history.

The IEBC has been allocated Sh4 billion for voter registration as the country gears up for a general election.

The amount is, however, a drop in the ocean as Githae is on record stating that a staggering Sh15 billion would be required to finance the elections. IEBC has already announced the elections will be held on March 4 next year.

The Teachers Service Commission has been allocated Sh6.1 billion for salaries and allowances. Additional funds were also required to cater for payment of new teachers and conversion of teachers on contract to permanent employment.

Money is also needed to cater for contributions to the teachers' new medical scheme.

Other major beneficiaries include the ministries of Transport (Sh4.9 billion), Medical Services (Sh3.8 billion) and Public Service (Sh1.5 billion).

The Ministry of Foreign Affairs is seeking Sh1.7 billion.

Barely two months at his new portfolio in Treasury, Githae is also likely to present to Parliament a one trillion shillings spending plan for the next financial year, the first under the devolved system of government.

According to preliminary estimates released from Treasury, the total budget for the fiscal year 2012/2013 is projected at Sh1.15 trillion, more or less the same level with the previous two budgets.

An estimated Sh364.8 billion and Sh782.7 billion would be reserved for development and recurrent expenditures respectively

Treasury's Budget Review and Outlook Paper (BROP) reported that total revenues, including appropriation-in-aid (AIA), would hit Sh922.6 billion, with external grants at Sh47.2 billion.

The overall budget deficit (including grants) in 2012/13 is projected to be about Sh177.7 billion.

Net external financing amounting to Sh.100.1 billion is expected to cover part of this budget deficit, leaving about Sh77.6 billion to be financed through domestic borrowing.

But the Government will not factor in proceeds from the sale of state-owned corporations, whose privatisation has been stalled by the delayed reappointment of some members of the Privatisation Board whose term expired more than a year ago.

The detailed and complete budget for the 2012/2013 fiscal year will be submitted to Parliament by end of this month.

According to BROP, which was tabled by Justus Nyamunga, a director in-charge of Economic Affairs at the Treasury, the Government will continue borrowing from the domestic and external sources (on concessional terms) to finance budgetary deficit.

The 2012 BROP is the first under the current Constitution and succeeds the annual Budget Outlook Papers (BOPA) that was produced under the old constitution.

It provides an overview of the fiscal performance in the preceding financial year, implementation of the current budget and broad fiscal parameters for the 2012/2013 budget and the medium term.

Medium term

The 2012 BROP covers the medium term expenditure framework (MTEF) period 2012-2013 to 2014/2015, which involves transition to a devolved system of government and implementation of the new constitution.

The BROP sector ceilings incorporate the cost of delivering devolved functions under the new Constitution.

The Government is expected to keep budgetary expenditures consistent with medium term priorities and continue with rationalization to improve efficiency and reduce wastage.

From Awareness Times Newspaper in Freetown

Somalia’s Islamists warn Sierra Leone of ‘Retaliation’

By Abdalle Ahmed (RBC Radio)
Apr 16, 2012, 12:18

The al Qaeda-linked group of Somalia, Al Shabab has yesterday Sunday 15th April 2012, warned Sierra Leone troops on peacekeeping duties, not to join the war in Somalia otherwise they will face the same fate as Kenyan soldiers who returned to Kenya as dead bodies. This is according to a senior Al Shabab commander by the name of Sheikh Abdurahman Muhumed Hudeyfa who commands in the Lower Jubba region.

Hudeyfa told the RBC radio that any troops from Sierra Leone which reached his region will face retaliation attacks against them.

“We, as the Mujahidin in Somalia tell the government and the people of Sierra Leone not to dispatch their boys to Somalia otherwise they will collect more bodies from here [just] as failed Kenyans did.” Sheikh Hudeyfa said according Al Shabab run radio.

“We will fight them as we fought against the crusaders of Kenyans, AMISOM and the Christian Ethiopians,” he vowed.

Hudeyfa says African Union forces [AMISOM] and Kenyans needed reinforcement as Al Shabab defeated them in the south and central Somalia.

“If they [AMISOM and Kenyan army] were successful they would not have to call Sierra Leone troops to join them. This shows they have failed in their oppressive and injustice reign against Islam,” Sheikh Abdurahman Muhumed Hudeyfa said.

The announcement from Al Shabab came as Somalia government and AMISOM await the first deployment of 850 soldiers from Sierra Leone in June. Three weeks ago military officers from Sierra Leone and Kenya visited the southern region of Gedo region to look at possible locations for the new deployment.

Meanwhile sources in Kismayo town report that Al Shabab officials begun recruiting new young teenagers to fight for them. Unnamed local resident told RBC Radio that offices allocated to the registering of teenagers have opened in the town.

Neither the Defence Minister Palor Conteh nor the Chief of Defence Staff Brigadier S.O. Williams were available for comments last evening when the news broke on the internet wires.

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