Parliament takes on Treasury in new austerity push
By Frankline Sunday | March 7th 2021
Parliament has taken the government to task over a rise in public debt and recurrent expenditure, setting the stage for a new push in cutbacks to State spending.
During a debate in the National Assembly on Thursday, members criticised the National Treasury for failing to reduce public debt and looking the other way as State departments flout the Public Finance Management Act, 2012.
Lawmakers have now given the National Treasury one month to report back on efforts and gains made in reducing domestic spending, as well as enact policy to reduce unproductive tax waivers to protect revenue collection.
"The fiscal deficit approved by Parliament for the 2021/2022 financial year is pegged at Sh930 billion, or 7.5 per cent of GDP, whichever is lower. Any increase of the fiscal deficit beyond what is approved will not be approved by Parliament,” said Budget and Appropriations Committee (BAC) chairman Kanini Kega.
In his budget policy statement released earlier this year, Finance Cabinet Secretary Ukur Yatani put the budget deficit for the 2021/2022 financial year at Sh983 billion and blamed the Covid-19 pandemic for revenue underperformance.
"Before Covid-19, the fiscal deficit was expected to gradually decline from 6.3 per cent of GDP in the 2019/2020 financial year to 4.9 per cent of GDP in the 2020/2021 financial year,” Yatani said.
He added: "However, due to economic disruptions caused by the Covid-19 pandemic, the fiscal deficit path was revised and is now expected to hit nine per cent of GDP in the 2020/2021 financial year. But this will gradually reduce to 7.5 per cent of GDP in FY 2021/22."
Appetite for debt
But MPs questioned the Treasury's commitment in following through on policy suggestions made in previous years that have done little to reduce the government’s appetite for debt or increase recurrent expenditure.
"The budget policy statement is a forest of words but a desert of policies and strategies,” said minority leader John Mbadi, who sits on two House finance committees.
Mbadi singled out delayed disbursements to the National Government Constituency Development Fund (NG-CDF) as a case in point, where every year the full 2.5 per cent quota of national revenue prescribed in law is not achieved.
"The PFM Act 2012 provides that any commitments that are legal, payable and remain unpaid in a financial year should form first charge in a financial year,” he said. "It therefore follows that when we appropriate for a new financial year, the amount of the current year and arrears from previous years should always be taken into consideration."
According to the Suba South MP, this implies that the Sh26 billion disbursed this year is meant to finance projects for the previous year.
Parliament also raised concern over the Executive's failure to follow through with a perennial promise of auditing State projects with a view of cutting funding to non-priority projects.
"The Treasury should further review all government projects and consider deferment of new projects by one financial year while ensuring adequate counterpart funding and provision of funds for stalled projects before finalisation of the budget estimates for the 2021/2022 financial year,” Kega said.
The lawmakers pointed out a financing gap of Sh1.5 billion to equip a forensic lab and another Sh500 million to set up offices of the newly created National Government Administration.
In the State Department for Correctional Services, MPs noted, multi-million shilling projects related to the prisons' enterprise department have stalled due to underfunding and budget cuts.
Parliament also pointed out that allocations to the Judiciary have stagnated at an average of Sh17 billion despite an increase in the number of cases, and new challenges posed by hearing cases virtually.
"We have been borrowing to finance recurrent expenditure. On an annual basis, between two and five per cent of our recurrent expenditure is financed through borrowing. This is why we are back to the IMF where we are being subjected to performance criteria and we have to report on certain actions,” Mbadi said.
The MP said the rise in public debt from Sh1.8 trillion in 2012 to the current Sh7 trillion is partly attributed to the government taking on a big stock of external debt at commercial rates.
"The public debt has been increasing with Sh631 billion annually since 2013. In the past we have been going to the commercial market to borrow at seven or eight per cent interest."
This is not the first time Parliament is calling for austerity measures and prudent policy making from the National Treasury.
In its report on the 2020/2021 budget last year, the BAC questioned Yatani’s decision to allocate billions of shillings to projects under the Big Four agenda as the economy reeled from the effects of the coronavirus disease.
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