MPs query state officers' oversight role as budget up by Sh187 billion

National Assembly Budget and Appropriations Committee chairman Ndindi Nyoro, flanked by other committee members, address the media at Hilton Garden Inn Hotel in Nairobi on November 14 after their sitting on budget estimations. [Boniface Okendo, Standard] Legislators have slammed the government over the major changes made in the budget for the current financial year, just months after the start of the year. The MPs, who make up the National Assembly's Budget and Appropriations Committee (BAC), expressed deep concerns over what appears to be the government shifting of goalposts shortly after getting its spending plans for the 2023/24 financial year approved in June. The implementation of the budget started in July. The National Treasury submitted a Supplementary Budget in late October that had major changes, which have resulted in an increase in overall spending and pushed up the fiscal deficit, which is likely to push the government into taking up more debt. The mini-budget has also increased tax revenue collection targets for the Kenya Revenue Authority, which struggled to meet the target for the first quarter, between July and September. Unsettling for the committee chaired by Ndindi Nyoro (Kiharu) is the sharp increase in government's overall spending by Sh187 billion that now pushes the budget for the 2023/24 financial year to Sh3.93 trillion from Sh3.74 trillion that was approved in June. The recurrent budget went up by Sh86.4 billion while the development budget has been reduced by Sh40.9 billion, which might mean cutting back on critical areas such as building roads and expanding health infrastructure. The committee raised concerns about the increase in the recurrent budget, questioning why there was oversight by government officials during the budget-making process, who failed to capture planned projects at the time. This has necessitated the mini-budget early in the financial year. "The committee raised concern over how such critical recurrent expenditures were left out during the budget-making process, which raises concerns over the credibility of the overall expenditure framework," said the committee in the report which will be debated in parliament. "The committee took note of the reduction in development expenditure on account of budget rationalisation, particularly in the State Department for Roads and the State Department for Housing and Urban Development. This reduction will affect GOK-funded projects whose budget has been reduced by Sh38.82 billion and development-partner financed projects whose budget has been reduced by Sh3.01 billion," said BAC in the report. "The reduction in development expenditure may negatively affect completion of ongoing projects resulting in additional pending bills." In the supplementary budget, the Treasury also increased the tax revenue collection target for the Kenya Revenue Authority (KRA) to Sh3.02 trillion, from the earlier Sh2.98 trillion. The Finance Ministry had said the tax measures contained in the Finance Act 2023 would enable the taxman to grow revenue collection and surpass the average growth rate of 10 per cent that KRA has over the years posted. The committee, however, has doubts as to whether KRA will hit the new target. This is considering its performance over the first quarter of the current financial year. "However, the committee noted that ordinary revenue collection by KRA in the period between July and September 2023 was below the planned target by Sh72.5 billion," said BAC. "Although this has been attributed to delayed implementation of the Finance Act due to court processes, it may still be an indication that the ambitious revenue target set for the 2023/24 financial year may not be attained." "The committee noted with concern that despite the shortfall in revenue collection in the first quarter, the resource envelope in the supplementary estimates has been adjusted upwards with the bulk of the bulk of additional revenue expected to be collected in the form of Appropriations-in-Aid, which has the increased by Sh34 billion." Other than the local economy which is still recovering from multiple shocks in recent years, the committee noted that there are external factors at play that could affect the economy. These include "high fuel prices that have affected demand, tight global financial conditions, mourning concerns over the national debt servicing, sluggish global demand, the geopolitical dynamics between Russia-Ukraine, Israel-Hamas and mounting tensions in the Middle East". In the Supplementary Budget, the fiscal deficit has risen to Sh861.3 billion, or 5.3 per cent, of the Gross Domestic Product (GDP) from the earlier budget where it stood at Sh718.9 billion or 4.4 per cent of GDP. BAC noted that this could go up if the KRA fails to meet the revenue collection target. "The committee is concerned that if the underperformance of the revenue persists and expenditures are maintained as proposed, then the fiscal deficit may be even higher, resulting in higher borrowing even as the country tries to address the high debt burden," said the committee in the report. It further noted that MDAs have in the past been under-reporting the amount they expect to collect at the beginning of the budget cycle only to revise it up during the supplementary budget. "There is an observed tendency of MDAs adjusting their appropriations-in-aid (AIA) upwards during the supplementary budget process and subsequently collecting higher AIA than initially budgeted for. Accurate estimation of AIA collection is critical as it will reduce reliance on the exchequer thereby freeing up resources to be utilised for other critical spending needs," said the Committee. "Upon the adoption of this report, accounting officers for all MDAs should declare their accurate projection of AIA collection as the beginning of the financial year. Any significant revision in AIA within the financial year will result in an equivalent reduction in exchequer funding for the entity." In other recommendations, the committee wants the National Treasury to provide a detailed report to the National Assembly on surplus funds held in the bank accounts of all state-owned entities as of November 30 this year. This should be within two months of parliament approving the report. The Treasury should also fast-track implementation of the national government single account framework and ensure that the treasury single account is operational by March 31, 2024. This is expected to consolidate government revenue and enhance efficiency in liquidity management. Other recommendations include the Ministry of Land and Housing expediting the National Housing Development Fund Regulations, the Sports Ministry submitting a comprehensive report on preparedness for the AFCON 2027 games by December 31 and the Health Ministry giving a report on the roadmap of the operationalisation of the Universal Health Coverage Acts. The committee also wants Kenya Power to fast-track the procurement of metres and transformers, particularly from local assemblers. It has also recommended that the Energy and Petroleum Ministry provide a comprehensive report on the fuel stabilisation programme since its inception in April 2021. Through the programme, the government has been cushioning Kenyans from the high cost of fuel.

MPs query state officers' oversight role as budget up by Sh187 billion

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MPs query state officers' oversight role as budget up by Sh187 billion

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