Why MPs bear huge blame for Kenya’s debt problems
SEE ALSO :County chiefs, MCAs use Sh15b on travelIn the next few weeks, for example, the State will start collecting a 16 per cent tax on all goods and services exchanged over the Internet as part of new levies introduced on e-commerce. The new tax targets one of Kenya’s fastest growing sectors and like the introduction of excise charges on digital transactions is effectively a case of killing the goose that lays the golden egg. While the new tax targets large platforms such as Jumia, Kilimall and Safaricom’s new e-commerce site Masoko, many small enterprises that rely on online market places for their sales will be slapped with the new taxes that will inevitably raise the cost of doing business and erode already thin margins. The VAT on e-commerce transactions is the latest attempt to raise revenue and narrow the Sh600 billion budget deficit that is projected to hit Sh800 billion by next year. Treasury’s remedy for filling the gap over the years has been to soak up more debt, with Parliament turning a blind to its excesses. This has seen the country inch closer to a debt trap. “History has shown a tendency for the Government to fail to adhere to its expenditure plans in the course of the year with upward adjustments during the supplementary budget, particularly for the recurrent estimates,” said the Public Account’s Committee in its report for the 2019/2020 financial year. “This is compounded by revenue underperformance, leading to budget reorganisation and rationalisation mostly for the development budget.”
SEE ALSO :Audit report paints wastage in assemblyThe committee has, however, failed to account for Parliament’s failure to block the Executive from pushing the country into more debt even when the expenditure has roundly been deemed inappropriate. Loan balances The Public Finance Management (PFM) Act 2012 says: “The CS shall submit to Parliament, every four months, a report of all loans made to the national government, national government entities and counties.” Treasury is mandated to provide either the Senate or Parliament with a report of all loans made to the national government, national government entities, and county governments, within seven days upon request. “At the end of every four months, the CS shall submit a report to Parliament stating the loan balances brought forward, carried down, drawings and amortisations on new loans obtained from outside Kenya or denominated in foreign currency, and such other information as may be prescribed by regulations,” states the Act in part. In press conferences and political rallies, MPs are quick to condemn Treasury’s huge borrowing appetite, a role that is within their powers to regulate. But in their chambers, MPs have used their oversight power to negotiate for more perks, and in some instances, threatened to sabotage government functions if they do not get their way. A few weeks before reading the 2019/2020 budget, Treasury borrowed Sh75 billion from the World Bank for budgetary support. This was the first time the State had turned to the World Bank for such, indicating the dire situation in which the country finds itself. Data from Treasury’s medium debt strategy indicates Kenya will need to make more than Sh1.2 trillion in external debt repayments in the next two years. At the time, CS Rotich was begging the World Bank for more loans, the Parliamentary Service Commission (PSC) decided to pay MPs and Senators Sh250,000 each in house allowances backdated to October 2018. The SRC has since moved to court to block the payments, terming them unconstitutional and amounting to paying MPs twice since the allocation is already factored in the basic pay. “The payment of this house allowance to MPs and senators amounts to double payment of a benefit which is already included by SRC in the gross pay,” said SRC Chair Lyn Mengich. “This unconstitutional action by the PSC to pay MPs and Senator’s house allowance of Sh250,000 monthly will cost taxpayers an extra Sh104 million every month, which is Sh1.2 billion annually.” Public servants In return, Parliament approved the second Supplementary Budget for the 2018/2019 financial year, including an Sh80 billion spike in recurrent expenditure that will mostly go to wages and allowances for public servants. MPs are predictably united when awarding themselves higher pay at the expense of taxpayers and have demonstrated the lengths they are willing to go to entrench their impunity. BAC slashed Sh126 million from the 2019/2020 budgetary allocations to the SRC to “teach the commission a lesson.” This is not the first time. Last year, Parliament sought to introduce amendments to the PFM Act 2012 to give the House more powers to oversight State expenditure as well as approve it. This followed revelations that the State had awarded US construction firm Bechtel a Sh300 billion tender to build the Nairobi-Mombasa expressway without following the due process. To appease the MPs, Treasury made a six-fold increase in their pension allocation from Sh292 million in the 2017/2018 financial year to Sh1.7 billion in 2018/2019. The biggest chunk of the additional pension bill went to one-off payments for the 196 MPs who lost their seats in the 2017 polls. Treasury allocated an additional Sh35.7 billion to the Constituency Development Fund, with each of the 290 constituencies receiving Sh118 million to finance development projects. The concessions saw Parliament rubber-stamp Treasury’s appetite for more loans even as the World Bank warned that public debt levels were pushing Kenya into “premature austerity”, further hurting the economy and job creation.
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