State raises only Sh1.4 trillion to finance ambitious budget

Business
By Brian Otieno | Feb 22, 2024
President William Ruto is hosting Cabinet Secretaries and Kenya Kwanza MPs to a National Executive Retreat in Naivasha, Nakuru County. [PCS]

The national government spent a quarter of its total annual development budget to finance projects during the first six months of the current financial year.

This even as the State failed to raise half of the Sh4.3 trillion needed to finance the budget that it should have, only managing Sh1.4 trillion, a figure that translates to 33.7 per cent of the gross estimate.

A report by Controller of Budget Margaret Nyakang’o shows ministries, departments and agencies (MDAS) spent Sh197.4 billion to finance development between July and December last year.

That is against the total Sh783.2 billion budgeted towards funding the national government’s projects and programmes, a figure that was revised downwards from an initial budget of more than Sh800 billion. It also represents 12 per cent of the national government’s total expenditure thus far, worth Sh1.6 trillion.

These figures, contained in the National Government Budget Implementation Review Report for the first six months of the current fiscal year, indicate that the government is still struggling to attain maximum absorption of development funds, pointing to harsh financial realities. The stated absorption rate stood at 24 per cent during the 2022/2023 financial year.

Another indication of the cash crunch is the fact that less than 40 per cent of the development expenditure was funded through the Consolidated Fund. Dr Nyakang’o’s report shows that exchequer issues from the Consolidated Fund earmarked for development amounted to Sh70.41 billion.

The Sh70.41 billion represents 15.4 per cent of the net development exchequer issues, a figure that stands at Sh457.2 billion. This is a sharp drop from 28.7 per cent raised during the same period in the previous financial year. At a time like this last year, nearly Sh121.8 billion worth of development was funded through the consolidated fund, the governments account.

What this means, to a significant extent, is that MDAs raised the bulk of their development expenditure through Appropriation in Aid funds, (A in A) money raised by the entities, and A in A loans that do not have to be deposited in the consolidated fund.

According to the Controller of Budget more than Sh50 billion of development expenses were raised within MDAs.

Among the biggest development spenders include the State Departments for Economic Planning (Sh27.7 billion), Transport (Sh20.3 billion) and Roads (Sh17 billion).

The Housing Department, which is implementing President William Ruto’s affordable housing project, only spent Sh5.4 billion on development during the period in question, against the projected spending of Sh92.5 billion by June this year.

“Analysis of MDAs’ development expenditure by economic classifications shows that the highest expenditure by category was on Capital Transfers by MDAs at Sh156.87 billion, representing 79.5 per cent of the gross development expenditure. Capital Transfers by the MDAs may be in the form of subsidies, grants, or direct transfers to Semi-Autonomous Government Agencies,” Nyakang’o states.

Comparatively, the government spent most of its funds on recurrent expenditure, exposing the chokehold such spending has on the National Treasury.

The CoB’s report shows that the government spent Sh1.4 trillion on recurrent expenditure, with Sh1.2 trillion of the said amount being withdrawals from the Consolidated Fund.

The amount collected marks a drop from the percentage of exchequer issues to net estimates recorded during the same period last year. The Sh1.1 billion the Kenya Kwanza administration collected in the first six months in office translated to 40 per cent, against the current 35.7 per cent.

“Shortfall in receipts into the Consolidated Fund is responsible for the delay in release of funds which may hamper the execution of planned activities by MDAs and County governments,” Nyakang’o warned in her report, recommending that the government enhances its revenue mobilisation.

At Sh163.7 billion, the Teachers Service Commission claimed the bulk of the national government’s recurrent expenditure, with the State Department for Basic Education (Sh84.56 billion), the Ministry of Defence (Sh69.96 billion) and the National Police Service (Sh55.89 billion) following.

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