Minister Francis Masakhalia's Budget speech was striking in its similarity to the 1998/9 estimates.

The themes were similar: Improve the regulatory framework and economic governance; deepen the reform process; re-invest in damaged infrastructure; alleviate poverty; generate employment and enhance regional integration.

These are, perhaps unsurprisingly, largely unaltered. But some of the detailed commitments are also unfulfilled and unchanged.

These are not new and the actions taken since the last Budget are not significant or apparent. I am not encouraged by the inclusion of limited net proceeds of privatisations in the income for 1999/2000. This suggests no increase in the pace with which assets are available for use in the private sector.

The private sector will continue to be restricted in its access to the major utilities. But I am unsure what the minister means by the "plough back" of proceeds from the sale of Telecom Kenya.

The reduction of direct taxation looks good. There is at least a superficial encouragement to the citizen that he may have greater buying power or saving ability.

If this aspect is carefully examined with the projected growth rates of GDP, inflation and population, it may prove to be less encouraging than it first appears.

I find little for the existing or new foreign investor. Clearly, corporates will be pleased at the rate reduction of tax, but they will also be looking at the likely cost- push inflation.

I am concerned for new corporate clients. They always seek markets that are attractive but where they have competitive advantage, and also seek predictability. They will find the threat of retaliatory protection for local industry increases the uncertainty about competition in Kenya. This return to market changes at the discretion of government are a reversal of liberalisation of the economy.

A 2.5 to three per cent growth rate is projected in the year. This is ambitious against the falling world economy and the turn-round from last year. Savings and investment with population growth at 2.4 per cent.

No pointers are given as to the source of this growth. Most crucially, however, this aggressive growth projection is the basis of his revenue forecast. If this is overstated, the variance from Budget is inevitable. We are unlikely to be able to blame KRA's revenue collection, which is increasingly efficient. I welcome growing realism because no assumptions are made about new programme financing by donors although specific project financing is expected to continue.

Money supply is expected to grow at 10 per cent, yet the minister confidently sets an inflation target of five per cent. The specific changes suggest inflationary pressures. Kerosene and petrol prices will increase and the harmonisation of VAT rates will push up the electricity cost. These key inputs to the economy will cost more.

Whither Kenya? Probably the best answer lies in the nationalistic statements he makes, which suggest a reactionary and possibly protectionist policy. This policy might save some of the least competitive of industries. I am still to understand how this aspect reconciles with the potential of Comesa and the promise of the East African Cooperation.

The writer is the Kenya country leader for PriceWaterhouseCoopers.

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