News and Analysis
December 4, 2024
The last week has been challenging for most Kenyans, characterised by long queues at fuel stations and empty pumps following a shortage of the precious commodity. Is the shortage over yet, or should Kenyans prepare for more empty pumps?
Meanwhile, the 2022/2023 budget is set to be read today, two months earlier than its usual date due to the upcoming polls, which require Parliament to dissolve two months before the poll date. What does the budget, which is Uhuru’s last one, contain?
In todays’ edition of Money Weekly, we’ll look at the 2022/2023 budget, the fuel shortage, and other important news stories from the last week that affect your money.
At 3 pm this afternoon, Treasury Cabinet Secretary Ukur Yatani will present the 2022/2023 budget, which is also the final budget during President Uhuru Kenyatta’s tenure.
According to estimates in the National Treasury’s 2022 Budget Policy Statement, total spending for the coming financial year will stand at an estimated Ksh3.324 trillion, a decrease from last year’s Ksh3.66 trillion budget.
Of the Ksh3.324 trillion, Ksh2.075 trillion will be allocated to the national government, including Ksh2.02 trillion appropriations to the executive. Meanwhile, Ksh38.5 billion will go to Parliament and Ksh18.9 billion to the Judiciary.
Ksh864.1 billion will go towards pensions and interest payments on public debt, while Ksh370 billion from national revenue and a further Ksh37.1 billion in conditional grants will go to county governments.
The lion’s share of the executive budget will go to the Ministry of Education, which will receive Ksh525.9 billion. Ksh368.3 billion will go to the Energy Ministry and Ksh203.1 billion to National Security. Meanwhile, the Ministry of Health and Ministry of Agriculture will receive Ksh126.4 billion and Ksh63.9 billion, respectively.
To finance the 2022/2023 budget, the government expects to collect Ksh2.142 trillion in taxes and government revenue, while Ksh289.8 billion will come from Ministerial Appropriations in Aid. Meanwhile, grants will provide an estimated Ksh46.9 billion, while 846.1 billion will come from domestic and foreign borrowing.
After years of evading the issue, Safaricom has finally announced plans to sync its popular payment platform with rival mobile payment providers Airtel Money and Telkom T-Kash.
Starting from Friday, April 8, Safaricom will make it possible for Airtel Money and T-Kash customers to make payments directly to merchants through Lipa Na M-Pesa, a move that will improve user convenience and boost financial inclusivity.
Currently, only M-Pesa customers can make payments to a Lipa Na Mpesa till, which locks out Airtel and Telkom customers from using the popular service and leads to loss of revenue for business owners.
The recently introduced Central Bank of Kenya (Digital Credit Providers) Regulations have made it illegal for digital lenders to list defaulters with credit reference bureaus (CRBs) without the defaulters’ knowledge.
Under the new regulations, which will take effect starting from September 18, digital lenders will be required to issue defaulters with a 30-day notice, either in writing or through electronic means, before forwarding the defaulters' names to CRBs.
Currently, digital lenders are not obligated to give defaulters any notice before forwarding their names for listing. However, many still do it to push defaulting borrowers into clearing their loans. A negative credit listing can make it difficult for one to access loans from other lenders and therefore serves as a deterrent against default.
Textbook publishing firms have warned that prices of textbooks could rise significantly soon, with the looming price increase attributed to skyrocketing international freight charges.
Kenyan publishers, which rely heavily on printing paper imported from China, Europe, Australia, and India, say that the cost of bringing in a container of paper has gone up from $1,500 (Ksh172,875) before Covid-19 hit the country to the current $8,000 (Ksh922,000).
The Kenya Publishers Association (KPA), which is the umbrella body for publishers, says that the higher freight costs have had an enormous impact on their profit margins. Therefore, KPA says, its members have no other choice but to pass on the costs to consumers.
To make matters worse, the Kenya Revenue Authority (KRA) raised the import duty on printing paper from 10% to 25% in February, further pushing up the cost of the essential raw material for producing books.
The increased cost of textbooks will force parents to dig deeper into their pockets at a time when many are already overburdened by the rising cost of living.
The Purchasing Manager’s Index (PMI) fell to 50.5 in March, down from 52.9 in February, an indicator of slowing growth in the country’s private sector economy. In other words, the economy still grew, but at a much slower rate than it did in February. This is the second time in three months that private sector activity has contracted in three months.
This decline in economic growth has been attributed to rising inflation in the country, leading to decreased consumer demand and decreased output by producers. With the cost of most goods skyrocketing, most Kenyans are choosing to reduce their spending.
The Markit Stanbic survey on which the PMI is based also recorded the lowest level of confidence in future private sector activity in the survey's history.
Farmers have a reason to smile after Agriculture Cabinet Secretary Peter Munya announced that the government has released Ksh5.7 billion to subsidise 114,000 metric tonnes (2,280,000 50kg bags) of fertiliser. The subsidised fertiliser will be available for sale at NCPB stores across the country.
Under the subsidised prices, a 50kg bag of DAP will retail at Ksh2,800, Ksh3,000 for NPK, Ksh2,700 for UREA, Ksh1,950 for CAN, Ksh2,500 for Sulphate of Ammonia, and Ksh2,500 for MOP. In doing so, the government hopes to bring down the cost of food production and prevent food shortages later in the year.
Before the subsidy, a 50kg bag of DAP retailed at Ksh6,000, while a bag of NPK went for as much as Ksh7,000.
It’s important to note, however, that the subsidy is aimed at small-scale farmers, with purchases capped at 20 bags per farmer.
Data from the Central Bank of Kenya (CBK) shows that the country’s foreign currency reserves, which are largely dollar-denominated, stood at $7.84 billion (Ksh902 billion) as of March 31. This is the lowest the official reserves have fallen since June 2021.
The available forex reserves are enough to cover 4.66 months of import, which is just above the 4-month limit set by the CBK and the 4.5-month limit recommended by the EAC convergence criteria. This decrease in CBK forex reserves comes at a time when the Kenya shilling has gone past the Ksh115 mark against the green buck, which is the lowest rate the shilling has ever recorded against the dollar.
Despite the decrease in official reserves, however, the CBK maintains that the available reserves are still enough for the country to meet all its external obligations.
A new business survey conducted by Viffa Consult across Nairobi, Mombasa, Kisumu, Kiambu, Nakuru, Machakos, and Kajiado counties has found that 92% of small and medium enterprises in these counties have defaulted on their mobile loans over the last 12 months.
According to the survey, business losses are the number one reason behind defaults. Other factors contributing to defaults include the diversion of borrowed money for personal consumption and emergency use and the failure of customers to pay for supplied goods and services.
Also Read: 7 Deadly Sins in Borrowing Money for Your Business
The survey also discovered that eight in ten SMEs borrow mobile loans every month, while 21% access mobile loans on a daily basis. The average mobile loan amounts borrowed by SMEs range between Ksh10,000 and Ksh50,000.
SMEs' demand for mobile loans is largely driven by fast credit processing times, convenience, and favourable credit terms. However, factors like high interest rates, short repayment periods, data privacy concerns, low credit limits, and risk of CRB listing have negatively affected the uptake of these loans.
After fuel shortages rocked most of the country over the last week, President Kenyatta finally cleared the release of Ksh34 billion to oil marketing companies (OMCs). The money is meant to clear the arrears owed to OMCs which has been blamed for the shortage.
Despite the release of the funds, however, the shortage might likely extend into the coming week as some OMCs stand accused of hoarding fuel stocks in anticipation of a price increase in the next price review, which will happen on Thursday next week.
OMCs have refuted accusations of hoarding stating they are now preferring to sell to in the export market, which with the entry of DRC into the East African Community (EAC), has increased demand.
''The margins usually in the export market are thinner but right now with the opening up of the DRC market and Rwanda post-covid means that the demand is very high and margins comparable to Kenya and most importantly cash upfront,'' Lexo Energy East Africa MD Jesse Muniu said in a statement.
Much of the fuel that came into the country over the last two weeks, as well as the fuel awaiting offloading at the port of Mombasa was shipped at higher prices and is yet to be priced by the Energy and Petroleum Regulatory Authority (EPRA).
As a result, OMCs are expected to continue holding onto fuel stocks until the new price review on April 14. This means motorists might continue facing long queues and empty pumps until after the review.
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