Implementing the new constitution expensive, admits Finance Minister Uhuru Kenyatta

By Ben Kinyanjui

Demand for money to implement the new constitution is putting pressure on available government resources, Finance Minister Uhuru Kenyatta has said.Finance Minister Uhuru Kenyatta says government facing spending pressures

Mr Uhuru said pressure is also coming from a section of civil servants including teachers and doctors who have demanded for higher wages. The pending election is also going to be a drain to the exchequer.

“We have experienced demand for additional spending pressures to accelerate the implementation of our new Constitution; deal with security operations; salary demands by teachers, doctors and other public servants, and servicing of increased external debt,” says Uhuru.

Though it is not clear how much will be required to implement the devolved government, Sh9 billion is required to conduct an election later in the year or early next year.

The minister said the demands combined with the internal and external shocks last year almost derailed the budget that was prepared with the assumption of continued strong economic growth and stable macroeconomic environment.

He said in the first half of the implementation of the budget, the economy faced domestic and external shocks occasioned by poor rains that led to sever famine, high energy and food prices.

“These threatened the prospects for faster economic development as we experienced high inflation and weakening Kenya shilling against the major foreign currencies,” he says.

“The rising inflationary expectations placed pressures on the exchange rate, which at one point weakened to Sh107 to the US dollar in mid-October 2011, before recovering recently to about Sh85 following the measures the government has put in place.”

He warned that high financial deficits, high rates of inflation and exchange rate fears create macroeconomic instability that puts growth and poverty reduction objective at serious risk.

“In view of the above, and to confront these challenges while maintaining within a sound fiscal framework, the government recently announced wide ranging measures to rationalise expenditures and cutting back on non-essential services,” he says.

The measures, Uhuru said are meant to bring down the budget deficit from 6.1 per cent of GDP in 2011/12 to 5.1 per cent by 2014/15, reduce inflation from 19.7 per cent in November 2011 to five per cent by 2014/15; and increase the gross foreign reserves to more than four months of import cover for goods and services.

“The objective of the Government is to stabilize the fiscal and current account imbalances by tightening fiscal and monetary policy to slow down inflationary pressures and exchange rate depreciation so as to pave way for the resumption of accelerated broad-based growth, especially in the pro-poor sectors of the economy,” says the minister.

“We are optimistic that the economy will continue to remain resilient and the real GDP growth for 2012 is will be above 5 percent with most of it coming from the expansion in agriculture, tourism and exports particularly tapping into the expanded market in the region.”