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State overshoots budget ceiling by Sh180 billion

By Paul Wafula | May 19th 2016
National Treasury CS Henry Rotich. A report by the Parliamentary Budget Office (PBO) has accused the three arms of government of presenting bigger budgets than had earlier been approved in the Budget Policy Statement (BPS). (PHOTO: FILE/ STANDARD)

The Government has overshot the budget ceiling for the new financial year by Sh180 billion, exposing the country to more debt.

A hard-hitting report by the Parliamentary Budget Office (PBO) has accused the three arms of government of presenting bigger budgets than had earlier been approved in the Budget Policy Statement (BPS).

The report, Unpacking the Estimates of Revenue and Expenditure for 2016/17, released yesterday says that Parliament had approved a total expenditure of Sh1.49 trillion for the three arms of government. The BPS had put a ceiling of Sh1.45 trillion for the National Government, Sh29.4 billion for Parliament and Sh17.8 billion for the Judiciary.

However, all the three arms of government did not abide by these ceilings when preparing their printed estimates, inflating the budget by Sh180.1 billion to Sh1.678 trillion.

“This includes Sh175.708 billion for National Government, Sh2.6 billion for Parliament and Sh1.8 billion for Judiciary,” the PBO report notes.

This in turn is partly to blame for the 11 per cent increase in the 2016/17 budget that comes into effect next month. The Government plans to spend Sh2.26 trillion in the 2016/17 budget compared to Sh2.05 trillion approved by Parliament in the BPS, 2016.

“The increase in expenditure is occasioned by an increase in expenditure ceilings for the three arms of government as well as the Consolidated Fund Services (CFS). National government, Judiciary and Parliament have increased their budget ceilings as compared to the BPS 2016 by 12 per cent, 9 per cent and 10 per cent respectively,” the report notes.

The CFS payments also rose by 6.5 per cent as opposed to what was approved in the BPS 2016. The increase in expenditure in the CFS will be driven by new loans, interest expenses and debt redemption.

“The BPS 2016 was anchored on austerity policies. However, the 2016/17 budget estimates submitted to Parliament indicate that these austerity policies will not be adhered to. This is a clear indication that the 2016/17 estimates are not driven by policies prescribed earlier,” the PBO report notes. “This poses a serious challenge on whether the 2016/17 budget will have a meaningful impact to the citizens.”

The Public Finance Management Act 2012 Section 25(8) and PFM Regulation 27 (4&5) indicates that once the BPS has been adopted by Parliament, the resolution of the House shall serve as the basis of expenditure ceilings specified in the fiscal framework.

Donor commitment

Also the PFM law requires the National Treasury, when unveiling the budget estimates to the National Assembly, to present a memorandum explaining how the resolutions of the National Assembly have been taken into consideration.

Out of 47 ministries, departments and agencies in the National Government, only 18 complied with the ceilings approved by the National Assembly while 29 did not.

In its explanation, the National Treasury indicated that a number of the deviations were either as a result of budget rationalisation, especially for recurrent expenditure, or increase in donor commitment especially for development expenditure. But Parliament and the Judiciary were yet to provide the justifications for deviations.

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