Kenyan embassies cry for State bailout as forex losses mount

Various world currencies. [iStockphoto]

Cash-strapped Kenyan embassies funded by the local currency where they are stationed globally have begged the government for a special fund to cushion them from mounting foreign exchange losses bound to halt their operations.

The Kenyan missions abroad say their budget is done in Kenyan shillings while some spending units utilise the funds in different currencies leading to huge foreign exchange losses which reduce the actual amounts available for spending.

Embassies are a key cog in bilateral diplomacy between Kenya and the rest of the world and also assist Kenyan citizens living, working, or travelling overseas.

"There is a need to establish a Foreign Exchange Loss Assumption Facility to cushion Kenya's Missions against foreign exchange losses and losses occasioned by bank charges on deposits abroad," says a new report published by the National Treasury.

The Kenya shilling has over the last year weakened against major currencies including the US dollar (123.3735), the British Pound (148.4671), and the Euro (131.2653).

The new round of shilling loss to the major currencies coincides with Russia's war in Ukraine which has raised import costs and fueled inflation causing a surge in food prices locally.

"The Kenya shilling remained stable against major international and regional currencies during the week ending December 29," said the CBK last week.

Kenyan foreign missions have in recent times come into focus given the cost of maintaining embassies abroad.

Despite this, Kenya plans to open more foreign missions.

The Parliament Budget Office (PBO) has in the past for instance urged Kenya to cut the number of embassies and hire foreigners for the country's diplomacy work in efforts to lower the cost of rent and hosting diplomats abroad.

PBO noted that, for instance, despite having 61 missions, including consulates and liaison offices that are spread across the five continents, Kenyan ambassadors have failed to increase trade in those countries.

The report by Treasury admits high rental and leasing costs in foreign missions are a challenge and calls for the establishment of a special fund to conduct maintenance work.

"There is a need to establish an Asset Acquisition and Management Plan Fund for diplomatic assets acquisition, maintenance and management," it says.

Embassies have also raised procurement challenges in foreign missions.

"There is a need to amend the Public Procurement and Asset Disposal Act (PPADA) 2015 to provide for flexibility in the application of procurement laws across Kenyan Missions," said the report.

Embassies further want Treasury to provide funds for IFMIS infrastructure rollout in missions abroad to ensure real-time accounting which will aid in decision-making.

"The incompatibility of the Public Procurement and Assets Disposal Act, 2015 with procurement procedures and practices in foreign countries has affected the implementation of capital projects in Kenya's foreign missions," says the report.

"Areas of incompatibility include different procurement practices in host countries, varied financial years, high advertisement costs, non-recognition of Kenya's contractual documents in other countries, and requirement for advance payments for construction and maintenance."' In some countries, quotations/tenders are submitted in a foreign language, and inconsistencies in the translation cause delays in the procurement, the report adds.