TRANSCRIPT: KENYA BUDGET 2009/2010 DELIVERED ON 11TH JUNE, 2009, BY FINANCE MINISTER UHURU KENYATTA

TRANSCRIPT: KENYA BUDGET 2009/2010 DELIVERED ON 11TH JUNE, 2009, BY FINANCE MINISTER UHURU KENYATTA

Theme: Overcoming Today’s Challenges for A Better Kenya Tomorrow

Mr. Speaker, the 2009 Budget is premised on the need to urgently overcome the immediate socio-economic challenges that we face today. This we must do in order to restore the confidence of Kenyans in their country and its institutions. As part of these initiatives we must strive to return the economy back to our long term growth path, while at the same time, providing impetus for building a cohesive and prosperous Kenya that we all desire. This Budget that I have the honour to table in this August House today, therefore, marks the first and bold step towards progressively building a better future for our people, consistent with our Vision 2030.

The objective of the 2009 Budget, Mr. Speaker, therefore, is to stimulate growth and protect jobs, reduce poverty, enhance food security and protect the poor. In framing this Budget, I have been guided by five underpinning principles, namely:

First, maintaining a stable macroeconomic environment and creating an enabling environment for business

Second, developing key infrastructure facilities and public works countrywide to stimulate growth, create employment and reduce poverty

Third, promoting equitable regional and social development for stability

Fourth, investing in environment and food security; and

Fifth, strengthening governance not because we have to, but rather, because it is the way forward in improving public service delivery.

Mr. Speaker, in response to the current challenges, and to avert a further slide in the expansion of our national cake, we plan to implement a fiscal stimulus package that focuses on sectors that will generate maximum benefit. Mr. Speaker, to address the existing imbalances in regional development, which have been a real source of social discontent, the stimulus programme is deliberately designed to cover all parts of the country. The programme has projects intended to expand irrigation-based agriculture with a view to ensure food security. We will, as part of this programme, construct wholesale and fresh-produce markets countrywide for the purpose of improving marketing and distribution of agricultural produce.

PRIORITY PRO-GROWTH AND PRO-POOR POLICY MEASURES
Mr. Speaker, underlying these principles is a two-pronged strategy that aims at focusing expenditures on priority areas that have higher impact on growth, such as infrastructure and public works, while at the same time, ensuring sufficient expenditures to cushion the poor and vulnerable. Mr. Speaker, the rest of my speech now elaborates specific policy measures I intend to take within the framework of the five principles I have outlined above to overcome the challenges we face today and build a stronger and prosperous Kenya.

Maintaining a Stable Macroeconomic Environment

Mr. Speaker, at this time of crisis, it is more critical that we uphold our commitment to maintaining a stable macroeconomic environment. In this regard, we will continue to pursue fiscal policy and structural reforms aimed at restoring our economy back to a high growth path but without undermining the objective of monetary policy to bring inflation down to the 5 percent target we have set for ourselves. In managing monetary policy, the Central Bank will strive to ensure availability of sufficient liquidity to support economic activity while also allowing for gradual rebuilding of official foreign exchange reserves, which have been eroded by the adverse impact of the exogenous shocks mentioned earlier.

Mr. Speaker, with respect to fiscal policy, let me say at the outset that it has not been easy to find room in the Budget for our commitments to national development objectives as outlined in Vision 2030, and to deal with the current challenges affecting the welfare of our people. As such, we have had to strike a balance between supporting growth and maintaining medium-term debt sustainability. Mr. Speaker, budgets are about priorities given the reality that financial resources are limited.

Therefore, Mr. Speaker, faced with the current economic challenges and bearing in mind that raising taxes is not a prudent option under the current circumstances, we as a Government, chose to partly accommodate the temporary financing shortfalls with savings arising from rationalization of government expenditures to remove waste and non-priority expenditure. I will shortly elaborate on the expenditures that we have rationalised. For the balance of the financing shortfall, we have adopted a programme of responsible borrowing.

Hon. Members, we consider the approach we have taken in terms of raising additional resources beyond the tax we expect to collect, not only appropriate but also prudent. This is a must if we have to safeguard jobs and bolster economic recovery. I am aware of the concerns that have been raised regarding the amount of money we intend to borrow from the domestic sources to finance the budget. I want, Mr. Speaker, to allay any fears Kenyans may have on this proposed borrowing. Our debt in relation to gross domestic product (GDP) is currently below 40 percent; thanks to the prudent manner in which we have managed our public debt in the past.
Moreover, debt sustainability analysis done taking into account the planned new borrowing demonstrates that we face a low risk of debt distress. Therefore, we are in a position to comfortably borrow in the short term to finance the proposed fiscal stimulus package without compromising our macroeconomic objectives.
 
Mr. Speaker, under the proposed fiscal framework, our total public debt is projected to peak to 44.5 percent of GDP in 2009/10 before declining thereafter. It is, however, instructive to note that even at this level our debt position remains within tolerable levels and is much lower than that for some of the large industrial countries. Nonetheless, over the medium term, we intend to bring down the budget deficits in order to commensurately reduce the debt ratio. We are also seeking for additional concessional assistance from our development partners, which we intend to use to pay off part of the domestic borrowing that will be applied to finance the fiscal stimulus package.

Creating Fiscal Space Through Expenditure Rationalisation, Strengthened Tax Administration and Enhanced Absorption of External Resources.
Mr. Speaker, as I have already indicated, a major policy challenge we face today is how to push the frontiers of economic growth to a sustained higher level, create economic opportunities and reduce poverty. Implementing measures to achieve these objectives means the government budget for 2009/2010 will be expansionary. The overall balance is expected to be in deficit by about 6.6% of GDP.

Mr. Speaker, as I have already mentioned, we plan to accommodate our financing shortfall partly by rationalizing expenditures to remove waste and generate savings. As Hon. Members will recall, in the Supplementary Budget for 2008/09, I took measures to streamline government expenditures to generate savings without compromising delivery of public services.
But Mr. Speaker, let me remind Hon. Members that these are difficult times. And difficult times require bold decisions. Indeed, this is what Kenyans expect of us. For this reason I am going a step further to institute more bold measures so that I can raise the resources we require to finance the priority pro-growth and pro-poor expenditures planned in this Budget.
To this end, Mr. Speaker, I have reduced from the ceilings of all ministries; the following non-priority expenditures that I believe will have no material impact on service delivery. These entail reductions as follows:

80 percent on furniture and fittings;
60 percent on advertisement and publicity;
40 percent on telephone expenses;
20 percent on hospitality supplies and services, which include, and I emphasize, include payments to various taskforces appointed by the government 5.10 percent on domestic and foreign travel and subsistence.

Mr. Speaker, government expenditure on transport has increased substantially over the years and unless checked, it will soon become unsustainable. In this regard, I will be requesting the cabinet to approve a new Transport Policy to address this problem early in this financial year.
With this in mind, I have put a moratorium on purchase of new motor vehicles, except for security purposes. Any purchase of new vehicles will be allowed only under very exceptional circumstances. Mr. Speaker, we will also introduce use of fuel cards for the purchase of fuel for government vehicles because we believe this measure will significantly reduce the amount of money the government is spending on fuel.

Mr. Speaker, in the face of the difficult economic times we find ourselves today, and responding to the call by Kenyans to contain non-priority expenditures, it is about time we demonstrated in concrete terms that we are a government that listens to its people. In this regard and after consulting with The President and The Prime Minister, I am directing that all Cabinet Ministers, Permanent Secretaries, Provincial Commissioners and other senior public officials who are entitled to official vehicles, shall henceforth be allowed only one vehicle whose engine capacity should not exceed 1,800 cc.

Mr. Speaker, once the new vehicles are in place, I am also directing all Accounting Officers to ensure that vehicles at the disposal of public officials that exceed the engine capacity I have just specified, are withdrawn and surrendered to the Chief Mechanical and Transport Engineer who will arrange for their sale by end of September 2009. Proceeds thereof will be used to finance priority areas such as resettlement of Internally Displaced Persons.

Mr. Speaker, as I said earlier, no public official will be exempted from this policy.
Therefore, I expect all Accounting Officers to strictly implement this measure to the letter. In this regard, I am pleased to report to this House that the Treasury, under my leadership, has fully complied with this directive starting today. Mr. Speaker, I have decided to lead by example.
Therefore, effective from today, I am now using an official car that is compliant with this requirement.

Mr. Speaker, the austerity measures we have undertaken are only the first step toward rationalizing our budget going forward. We shall continue to scrutinize all votes of ministries in the course of this fiscal year with a view to identifying further areas of savings. To this end, I have instructed the Permanent Secretary to the Treasury to launch a comprehensive audit of the payrolls of all organization paid through the Exchequer. I expect the report of this audit to be ready by the end of October 2009.

Mr. Speaker, our utilization of donor funds has been low and this is unacceptable because it delays the development benefits to our people. In a sense, development delayed is development denied and Kenyans cannot afford this especially during these difficult times when it is not easy to obtain additional external financing. In this regard, part of the fiscal space will come from enhanced absorption of external funds from the current rate of about 50 percent to about 80 percent in FY 2009/10. I will establish a Unit at the Treasury to work with line ministries in monitoring project performance in order to unlock the constraints that are responsible for implementation delays. In due course I will be outlining guidelines specifying how these targets will be achieved.

We will also be introducing an Electronic Project Monitoring Information System (e-Promis) before the end of this year. Once operational, this system will enable Treasury to continuously monitor project performance at every stage. In order to ensure transparency and encourage public participation, the e-PromisPromis portal will also be open to the public to enable wananchi to monitor the performance of projects of their interest. When fully operational, it will be possible to monitor all government projects including those funded through the Constituency Development Fund (CDF).

Mr. Speaker, on enhancing revenue collection, we recognize the need to further deepen the reforms, including implementing measures targeted at enhancing the operational efficiency of the Kenya Revenue Authority. Achieving these goals requires strengthening the institutional arrangements of KRA and holding all the officers to the highest standards of ethical and integrity behaviour in the conduct of business, while at the same time creating incentives for performance.
In addition, sanctions for under-performance or actions leading to loss of revenue must be enforced across the entire spectrum of the organization.

FURTHER DEVELOPING KEY INFRASTRUCTURE FACILITIES AND PUBLIC WORKS COUNTRYWIDE TO STIMULATE GROWTH, CREATE EMPLOYMENT AND REDUCE POVERTY

Supporting Businesses and Enhancing Competitiveness Promoting Conducive Business Environment

Mr. Speaker, the Government recognizes the important contribution the private sector has made in the process of building our economy over the years. For this reason we have been instituting a number of reforms to ensure they even play a greater role. We have in this regard come along way in terms of improving the business environment, but, as we continue to be reminded by our private sector partners, these are not enough. In this regard, I will elaborate on some of the measures we are proposing to address some of these challenges while presenting the tax policy measures planned for FY 2009/10 later.

Mr. Speaker, for now I will address myself to the regulatory challenges that arise mainly from the failure to appreciate the cost of regulation to businesses. This is compounded by lack of an appropriate framework for consulting with other public entities and more important the private sector itself when introducing new regulatory procedures or levies. To address these challenges, we will in the course of this fiscal year: (i) submit to this House the Business Regulation Bill that will empower the Business Regulatory Unit legal power to vet and recommend to the Minister for Finance any proposed new levies; and (ii) make operational the e-Registry for business licences; and (iii) fast-track implementation of ongoing licensing reforms.

Reforms under Agenda Four

Mr. Speaker, under the National Accord, the Grand Coalition Government committed itself to facilitate far reaching and coherent reforms in order to create the environment for a stable democratic and prosperous country, popularly as known Agenda IV. We recognize that without focusing on these reforms, our efforts to build a prosperous Kenya may not be realized. In this regard, the Treasury has allocated Ksh. 2 billion toward implementation of reforms under Agenda Four, in addition to specific monies provided for under respective ministries and agencies.

Mr. Speaker, through this Budget, we are also fast-tracking reforms in the Judiciary to expedite service delivery and in particular to ensure faster disposal of commercial and civil cases in order to reduce the cost of doing business as well as congestion in our corrective facilities and Courts. To this end, I have provided the Judiciary Kshs.3.1 billion, of which Ksh 250 million will be used to fund the pilot phase of the automation and modernization of our courts and employ 20 additional Commissioners of Assis. On successful completion of the first pilot phase, we will build on this experience and roll this program countrywide. We remain fully committed to adequately supporting the Judiciary in order to ensure prompt justice so that no more Kenyans languish in our corrective and remand facilities due to avoidable delays in our courts.

Maintaining Law and Order and Providing Security

Mr. Speaker, we all know that adequate security is essential to achieving the objectives of our Vision 2030. For this reason, the Government will continue to fully support our security agencies in order to ensure that individuals, communities and investors are well secured. In this regard, the Government has decided to enhance community policing by engaging our youth to work under the guidance of the regular police force in collaboration with the chiefs to strengthen security at the constituency level. In this regard, I have allocated funds to support this initiative, including funds to purchase motorised bicycles for use by the local chiefs and youths engaged in community policing. We expect this initiative will inculcate a sense of responsibility and discipline in our youth, and as an incentive for those who are successful, the government encourages the recruitment units of our disciplined forces to give priority to these young men and women.
Accelerating Infrastructure Investment

Mr. Speaker, over the last six years or so, we have invested heavily in infrastructure. The ongoing construction works throughout the country clearly attest to this. We must thank our development partners, particularly the EU, the World Bank, the AfDB and China for the valuable support in the road and energy sector. As part of the Government's fiscal stimulus program, we will continue to allocate substantial amounts of financial resources to infrastructure projects in order to enhance competitiveness and stimulate higher growth for employment and wealth creation. In this Budget therefore, Mr. Speaker, I have allocated Kshs.140 billion for infrastructure spending and this will cover roads, rail, ports, broadband and energy.

Mr Speaker, while we have made significant progress in expanding the road net work in the rural areas, we still face serious challenges with respect to timely routine maintenance to ensure they are functional throughout the year. This is despite the fact that part of the fuel levy fund is available for this purpose. After consulting with my parliamentary colleagues, I propose to this House that the portion of the fuel levy meant for the rural roads be channeled through the Constituency Development Fund (CDF) for the maintenance of rural roads at the constituency level. I am confident that CDF mechanism will ensure timely and efficient utilization of these funds for the intended purposes.

Positioning the Port of Mombasa as Regional Service Hub

Mr. Speaker, the port of Mombasa plays an important and strategic role not only to Kenya’s development but also to the development of the hinterland countries of Uganda, Rwanda, Democratic Republic of Congo (DRC), and Southern Sudan, that it serves. However, the current clearing system for cargo faces a number of challenges that compromise our country’s ability to maximise on the benefits that accrue from international trade. Indeed, documentation procedures are largely manual, resource intensive and expensive. To position the port to continue playing its strategic role more effectively in an increasingly competitive environment, there is need to urgently address these challenges. In this regard, the Government will establish in the course of the year a single window port community based system to facilitate faster, efficient and competitive clearance of cargo at the port of Mombasa. In addition, plans are underway to dredge the port and make it accessible for bigger ships, while the on-going work on the construction of a second container terminal will be accelerated.

Mr. Speaker, concurrent with the initiative we are taking to improve the efficiency of the port of Mombasa, we are also attending to the challenges in the railway system. In this regard, the Government of Kenya, working jointly with the Government of Uganda, has made decision to construct a new standard gauge railway line from Mombasa to Western Kenya and to Kampala in Uganda. The new railway line will not only reduce the cost of transport but also facilitate faster movement of freight and passengers, thereby enhancing competitiveness and improving the welfare of our people.

Mr. Speaker, considering that construction of the new railway will significantly reduce the maintenance costs of the Northern Corridor roads, it makes economic sense to use part of the road maintenance fund to invest in this railway. In this context, I will, in consultation with the Minister for Roads, be proposing an amendment to the Roads Maintenance Levy Act and the Kenya Roads Board Act to make road-bed for railway line development and maintenance eligible for funding. Meanwhile, I have allocated Ksh. 3 billion to initiate this important project. I expect the Ministries and Agencies responsible to expedite the process with a view to commencing construction by the last quarter of this financial year.

Mr. Speaker, the development of infrastructure in Nairobi Metropolitan Area is equally crucial to making Nairobi a competitive service hub. Apart from improving provision of water and security services, we are fast tracking the development of a light rail system in Nairobi and its suburbs, and construction of bypasses and modern interchanges to solve current traffic congestion. As a first decisive step, and in partnership with an infrastructure development company called InFraCo (a Private Infrastructure Development Group comprising of the World Bank, SIDA, DFID, Governments of Switzerland and Netherlands), we have commenced work toward the upgrade of the Nairobi Commuter railway system serving the heavily populated parts of Nairobi in order to reduce traffic jams and transport related costs currently hurting businesses as well as the poor urban dwellers.
Expanding Access to Affordable Energy Supplies for all Kenyans

Mr. Speaker, to enhance supply of environmentally friendly and affordable energy to our economy, the focus of our investments will be on development of renewable energy such as geothermal, wind, bio-fuel, biomas and use of solid waste. The Government will also continue to scale up investment in transmission while at the same time upgrading existing ones in order to stem systemic transmission loses that partly contribute to the high cost of energy. The Government will also continue to expand the rural electricity program covering all major trading centres countrywide. Toward this end, I have allocated Kshs 7 billion. In addition, the Government will encourage private sector participation in electric power generation from wind, biomass, and recycled waste within the Public Private Partnership (PPP) framework.

Leveraging Emerging ICT Opportunities

Mr. Speaker, after three years of heavy investments in ICT infrastructure, our economy is about to be hooked onto the global digital grid through the undersea fibre optic cables. We must leverage on this affordable broadband connectivity to accelerate economic growth, expand economic opportunities so as to reduce poverty among our people. Appropriate utilization of this infrastructure would yield some savings as well as create efficiencies for a better and more productive economy thereby creating jobs and moving our economy up the value chain and reducing the cost of doing business.

Mr. Speaker, to further expand access to benefits presented and to ensure no Kenyan is left behind by the ICT revolution, I propose the following investments as part of the stimulus package:
First, I have allocated Ksh1.3 billion to purchase Mobile Computer Laboratories for each constituency for use by our high schools. This initiative will serve as a pilot project since in the coming years we intend to expand the scope of the project to include primary schools.
Second, we intend to support the roll out of the Digital Villages in partnership with the World Bank. These centres will create business hubs and expand economic opportunities in rural areas.

Third, immediately launch a one million laptop/computer campaign countrywide in conjunction with Broadband providers by undertaking to underwrite part of the interest payments on funds borrowed to purchase these laptops and computers. Mr. Speaker, I trust that this campaign would benefit University Students, public servants as well as ordinary wananchi, thereby enabling them to take advantage of the cheaper broadband now available in our country.
Promoting Regional Development for Equity and Social Stability

Mr. Speaker, the promotion of equitable regional and social development is a central objective of the Grand Coalition Government. The thrust of this Budget therefore is to ensure that the budgetary resources reach the people at the constituency level. . Since, our focus will be to stimulate economic activity at the constituency level, we will channel these resources as conditional grants through the respective ministries, using the existing Constituency Development Fund framework. This will facilitate local accountability, strengthen oversight to ensure all the funds allocated are strictly used for the planned purposes.

Mr. Speaker, during the ERS period, the Government established the Constituency Development Fund, and as a result, we have achieved tremendous progress in taking development to the people. To scale up the good work and ensure wananchi continues to benefit from this Fund, I am this year allocating Ksh.12 billion. With this amount, each constituency will now receive on average KShs.60 million to finance its various development projects. In addition, as I said earlier, I will be proposing amendments to the Roads Maintenance Levy Act and Kenya Roads Board Act to allow for 22 percent of the Road Maintenance fund to be used for the maintenance of constituency roads. I have also proposed appropriate amendments to allow this amount totaling Ksh. 4.7 billion to be channeled directly to constituencies through the Constituency Fund Board. With these amendments, I have increased significantly resources channeled through CDF for development and road maintenance from KShs.10 billion in 2008/09 to about Kshs 18 billion or an average of Kshs 86 million per constituency, representing 80 percent increase over the year ending June 2009. I expect these bold and historical measures will go a long way to measurably improve the conditions of our rural roads, promote commerce and consequently improve the welfare of our people.

Mr. Speaker, even after allocating about Kshs 90 million to each constituency for development, we are going a step further through this budget to make it possible for every Kenyan to participate in restoring their economy back on to a higher growth path, working together to expand economic opportunities and creating employment. In this regard, I have allocated additional Kshs 22 billion, an equivalent of Ksh. 105 million per constituency as conditional Economic Stimulus or Resilience Package toward financing infrastructure development covering education and healthcare, and other development projects. The funding for these interventions is provided under the respective ministry’s votes and will be released through the CDF Framework to those specific projects under strict guidelines to be developed by the Treasury.
Public Procurement to Promote disadvantaged Groups, micro, small and medium enterprises

Mr Speaker, in an effort to boost the welfare of disadvantaged groups, micro, small and medium enterprises, I direct the Public Procurement Oversight Authority to make appropriate regulations that will enable these groups to participate effectively in Government tenders. These regulations should ensure that contracts awarded through the CDF, LATF and other development funds are reserved for tenderers who are located and operate in those regions except where such local capacity is not available.
This initiative, which demonstrates the Government’s commitment to local-level budgeting, marks a departure from the past, and building on the experience of this first piloting phase, it will be scaled up to ensure we ultimately achieve in a constructive manner equitable development in our country. And through these initiatives Hon Members, Kenyans will emerge with strength when the global economy recovers, and enhance their capabilities and competitiveness for the long term.
Expanding Economic Opportunities in Rural Areas for Employment Creation

Mr. Speaker, as a decisive step toward equitable regional development, this year’s budget also focuses on rural development by creating income and employment opportunities to our people. In this regard, I have proposed a number of local-level initiatives.

First, I have allocated a total of Ksh 1.8 billion or Kshs 10 million per constituency for the construction of fresh-produce and wholesale markets in countrywide to address the missing markets and facilitate commerce, trade and rural enterprise development.
Second, I have also allocated Ksh. 1.1 billion or Kshs 8 million per constituency for the construction of 200 fish-farming ponds covering 140 constituencies countrywide to improve nutrition and create over 120,000 employment and income opportunities to our people.

Third, I have allocated Ksh. 525 million or Ksh. 2.5 million per constituency for the construction of jua-kali sheds and another Ksh 210 million or Ksh. 1 million per constituency to equip these sheds with appropriate tools and equipment in order to empower our youth directly benefit from the massive construction works we have initiated at the local levels.

Fourth, I have further allocated additional Ksh. 500 million to Youth Development Fund and another Ksh. 500 to boost the Women Enterprise Fund kitty in order to extend credit for business start-up and expansion throughout the country. Going forward, I expect these Funds will also be devolved to equitably benefit youth and women at the constituency level.
Resettlement of IDPs

Mr. Speaker, the post election crisis displaced many people from their homes. While resettlement efforts have progressed well, a number of the IDPs continue to live in makeshift camps. To deal with the problem once and for all, I have allocated KShs. 2.2 billion to support the resettlement of IDPs. A further KShs. 500 million has been set aside to assist them rebuild their destroyed businesses. In addition to this, Mr. Speaker, through the assistance from the African Development Bank, the Ministry of State for Special Progammes will be implementing “The Restoration of Farm Infrastructure and Rural Livelihoods” project intended to resettle and empower communities affected by post election violence in the two Districts of Uasin Gishu and Molo. The project components will include reconstruction of 19,000 low-cost, 3-room farm houses, including produce storage space for returning farm households, with priority given to female headed households; and the Purchase of Agricultural inputs comprising of maize seeds and fertilizer through the National Accelerated Agricultural Input Access Programme (NAAIAP).

Northern Kenya and Arid and Semi Arid Lands

Mr Speaker, with regard to the development of Northern Kenya and other Arid lands, we plan to undertake numerous interventions in the region. Key projects include the Isiolo–Modagashe–Garrisa–Wajir road at a cost of 1.2 billion; development of water infrastructure at KShs 4.4 billion; installation of solar panels in secondary schools in ASAL areas at KShs 200 million; and construction of abattoirs costing Kshs 130 million in isiolo and Garissa. In addition, resources for Arid Lands Resource Management Programme will be enhanced to KShs 2.5 billion in 2009/10.
Promoting Growth of Tourism and Export Sector

Mr. Speaker, following the post election violence, our tourism sector suffered major losses with a decline of about 60 percent in the first quarter. With the sector expected to play a key role in achievement of Vision 2030 objectives, strong actions are required to be taken for the sector to withstand the current challenges and return to its impressive performance that was witnessed prior to post election disturbances. As a step towards this direction, I have allocated Ksh 800 million to be channelled through the Kenya Tourist Development Corporation (KTDC) to be lent to business enterprises in this sector in order to protect jobs. In addition, Mr. Speaker, I have allocated another KSh 400 million for tourism marketing, targeting the high-end market.

Mr. Speaker, as I have already alluded, the current global economic recession has adversely affected our export sector, especially the horticulture industry. In order to cushion this vital sector and enable players to continue employing our people, I will be outlining later in my speech tax proposals to improve cash flow.

Mr. Speaker, we recognize that these measures may not be enough to fully mitigate the challenges facing these sectors. In this regard, we are planning to introduce additional measures in the course of this fiscal year to further safeguard and stabilize our exports and tourism against exogenous shocks. But in these challenges, we see opportunities. In this regard, I want to encourage sector players to now focus on value addition and diversification of their products to reduce possible risks in the future.

Making Quality Healthcare Accessible to all Kenyans

Mr. Speaker, as we strive to overcome the current challenges, we must recognize that building a better Kenya requires a healthy population. To achieve this objective, we plan to provide an efficient health infrastructure covering all parts of our country, and raise the quality of health care to our people. In this regard, we are initiating a comprehensive program of healthcare reforms covering infrastructure development, promotion of preventive healthcare and devolved management of facilities.

Mr. Speaker, in addition to direct funding to the two ministries of Health to finance ongoing programs, I have allocated a total of Ksh 4 billion or Kshs 20 million per constituency under the Ministry of Public Health and Sanitation for the construction and equipping of a health centre in every constituency. This is the first step in our 3-year journey towards achieving a countrywide healthcare facility upgrade programme. Mr. Speaker, as a Government that cares and listens to its people, we are going a step further, consistent with our policy to promote preventive healthcare, to employ on contract terms and at the local level, additional 4,200 nurses or 20 nurses per constituency countrywide. To this end, I have allocated a total of Kshs.655 million, which translates to Kshs 3.1 million for each constituency.

Mr. Speaker, to ensure effective delivery of both preventive and curative healthcare in our health facilities countrywide, I have allocated additional KShs.500,000 for the purchase of 5 motor cycles for health workers and another 30 bicycles for community health workers in every constituency. I have also allocated Kshs 5 million as additional funding toward constituency medical supplies kit. This is in addition to the funding I have allocated through the two ministries of Health to KEMSA for the purchase of medicine and other medical supplies. And to ensure efficiency in drug supply chain, storage and inventory control, I expect the two Ministries of Health, through KEMSA, to ensure an appropriate procurement system is put in place.

Improving Infrastructure and Quality Education Countrywide

Mr. Speaker, having put pupils back to class through Free Primary education and Free Tuition in Secondary Schools, our focus is now on how to improve quality of education throughout the country. In addition to the annual allocation towards payment of teachers and running of schools, I have allocated an additional KShs.1 billion each to Free Primary and Free Secondary Tuition to take care of increased cost of goods and services.

Mr. Speaker, through this budget, we are also initiating a countrywide program to upgrade infrastructure and quality of education in order to give our children a better foundation consistent with the requirements of the modern labour market. To this end, I propose to:

Allocate Ksh 1.5 billion or Kshs 7 million per constituency for the up grading of two primary schools, and equipping them with water harvesting and under ground water storage facilities; For far too long, we have made reference to a few schools as centres of excellence. Time has now come when such schools should be available in all parts of our country. I have therefore allocated Ksh 6 billion or Kshs 30 million per constituency for the construction of one secondary school as a centre of excellence. I expect the completion of this school upgrade program will provide equal life-long opportunities to all our pupils throughout the country;

Allocate Ksh 1.3 billion or Kshs 6 million per constituency for recruiting additional 10,500 primary school teachers on contract or 50 primary school teachers per constituency to improve the quality of educational service. I also propose to allocate Ksh 353 million or about Ksh 2 million per constituency to recruit additional 2,100 secondary school teachers on contract terms, or 10 teachers per constituency as a first step; and Recognizing the need to hook our schools to the ICT grid and promote e-learning, I propose to allocate Ksh 1.3 billion or Kshs 6 million per constituency toward the purchase of a digital laboratory bus.

Investing in Environment and Food Security

Mr. Speaker, the extreme floods and droughts, incidences of vector and water-borne diseases, famine and malnutrition are some of the indicators of climate change.

Recognizing the importance of our environment for sustainable development, the Government remains fully committed to addressing the deterioration in the forest cover and quality of the urban environment. Efforts to rehabilitate the five water towers have been initiated, while a master plan for the restoration and rehabilitation of Nairobi River Basin has been developed to guide our conservation efforts. We are doing this because we want to ensure we do not bequeath our mistakes to the next generation.

Mr. Speaker, our children should know and appreciate the value of a clean environment and learn how to protect mother-nature. In this regard, I have allocated Kshs 1.2 million for tree planting programs in 20 primary schools in each constituency. This program is expected to contribute toward conservation of our environment and give our children a practical opportunity to participate in the conservation of their environment.


Mr. Speaker, countries are going green in their quest to generate clean energy and Kenya must not be left behind. In order to move forward in transforming Kenya into a green economy, we will establish a Green Energy Facility to offer interest free long-term loans to firms that opt to replace conventional high cost energy generation with low cost green energy alternatives. The facility will be funded by the government and managed by a consortium of selected banks. This is aimed at lowering energy costs and reducing consumption of power from the national grid. The government will also adopt energy saving methods including replacement of all conventional bulbs with energy saving bulbs produced locally. As part of this greening programme, we shall also fast track completion of five power generation projects that have been identified.

Mr. Speaker, to operationalise this initiative, I have earmarked, as government contribution, Kshs 500 million. I expect to elicit donor support through this initiative to scale up its operation. In addition, Mr. Speaker, I have allocated an addition Kshs 400 million for the installation of solar technologies in the Arid and Semi-Arid regions.

Ensuring Food Security

Mr. Speaker, agriculture remains the mainstay of our economy. However, our dependence on rain-fed agriculture has continued to expose our nation to famine. Through this budget we are initiating a programme intended to reduce our reliance on rain-fed agriculture and thereby substantially enhance our food production. This, we are committed to do in order to ensure that we begin our journey to a food-secure Kenya so that Kenyans never go hungry again.

To this end, the government through the coordination of relevant ministries and departments is working out an implementation strategy over the medium term focusing on mechanization, irrigation, use of hybrid seeds, water harvesting, providing mixture of chemical and green crop nutrients, efficient storage and marketing systems and application of scientific farming methods.
As a first step to ensuring our country is food secure in the medium term, I have allocated substantial resources to respective ministries responsible for agriculture and irrigation and regional development. In addition we have allocated Ksh. 3 billion toward rehabilitation and expansion of irrigable land under Bura, Hola, Tarda, Wei Wei and Kerio Valley. From these investments we expect to harvest about 1 million bags of rice and maize by the end of December 2009. As we scale up resources toward irrigable agriculture, we are confident that this great Nation will emerge as a net exporter of food by 2012.

Taking Care of the Vulnerable Members of Our Society

Mr. Speaker, with the current economic challenges, the need to protect the livelihoods of the poor and vulnerable groups in our society has become even more urgent. While some existing programmes have worked well, their coverage is limited. In particular, the urban poor have not been reached. It is for this reason that the government is in the process of developing a national social protection policy, aimed at target in all the deserving members of our society. In this regard, the Government has formed a Taskforce to spearhead the development of a well targeted food subsidy scheme to ensure food security and improve the welfare of the vulnerable groups. To support this programme and to ensure its roll-out in the course of the year, I have earmarked KSh 1 billion out of the KSh 2 billion set aside for drought relief in the budget.
Mr. Speaker, this social protection programme will supplement the initiatives I have outlined under the economic stimulus package, which are aimed at expanding economic opportunities in both rural and urban areas for employment creation, social stability and equitable development.

Mr. Speaker, as a society we must care for those amongst us who are either elderly, physically or mentally challenged, recognising that disability is not inability. In this budget, I have allocated Kshs 200 million interest-free revolving fund toward financing business ventures by our brothers and sisters who are physically challenged. Through this budget, Mr. Speaker, I am going a step further to gazette regulations allowing disabled persons, employed or self-employed tax free income up to Kshs 150,000 per month, and further allow for additional deduction to their taxable income of up to Kshs 50, 000 to cushion them against expenses on drugs, purchase of disability related devises, home care services and treatment.

Mr Speaker, We have in the past taken steps to improve the welfare of our senior citizens through our tax system. This time round, I have allocated Kshs 200 million as a cash transfer to elderly persons of over 65 years and those mentally challenged. Modalities for ensuring effective and timely transfer of such funds on a monthly basis will be developed before the end of this year. Mr. Speaker, we recognize that such a program is not complete without taking into account those physically and mentally challenged in special institutions of learning and care. To this end, I have also allocated Kshs 100 million for purchasing specialized equipments and other requirements to meet the needs of these members our society.
Strengthening Governance for Sustainable Development

Mr. Speaker, we recognize the importance of good governance for sustainable development and, in this context, the government is committed to enhancing its governance programme for better service delivery. This will ensure an efficient and effective public service that will provide an enabling environment for sustainable business growth and development.

Mr. Speaker, the Treasury on its part, will continue to strive to ensure that public resources are used efficiently and effectively for their intended purposes. We will intensify our commitment to working with other Ministries, Departments and Agencies in the government, to enhance financial integrity, and advance good governance.
Mr. Speaker, to ensure value for money to taxpayers and enhance accountability, the
Government will in the first quarter of fiscal year 2009/10 develop and enforce sector specific public work benchmarks covering such areas as the construction of roads, bridges, dams and boreholes.

Mr. Speaker, it has become clear that public entities are paying extremely highly inflated prices for items that are easily available in the market. Going forward, procurement for all common user items shall only be allowed within the established price reference. To address the problems encountered in procurement including urgent purchases at the closure of the financial year, we shall also henceforth ensure that proper annual procurement plans are prepared and all procurements are implemented within the agreed plans. We will also introduce strict ethical and integrity code of behaviour for all officers working on public financial management – procurement officers, finance officers, accountants, CDF officers, budget supplies officers and internal auditors

Mr. Speaker, we are optimistic that these measures implemented within the framework of the Governance Strategy for Equity and Poverty Reduction will enhance Financial Integrity in the Public Service by making the misuse of public resources difficult to commit, likely to be detected, and, certain to be punished. We reaffirm our full commitment to restoring the much needed trust, and the confidence of the Kenyan people in the Government, and that of investors in the Kenyan economy.

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