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Budget freeze on development slows absorption

BUSINESS
By Macharia Kamau | March 27th 2020

Controller of Budget Margaret Nyakango wants Treasury to send funds to agencies based on their work plans. [ Boniface Okendo, Standard]

A freeze on new projects by parastatals slowed down the absorption of funds set aside for development of capital projects.

The government mid last year directed all State corporations to stop new projects and channel the money to President Uhuru Kenyatta’s legacy projects under the Big Four Agenda.

This has resulted in the different State agencies posting an even poorer absorption rate of their development budgets.

The Controller of Budget (CoB) report noted that the National Government spent 34.5 per cent of what had been set aside for development budget over the six months to December 2019.

This is in comparison to 38.8 per cent absorbed over a similar period in 2018.

“A total of Sh263 billion was spent on development activities in the first half to December 2019, translating to an absorption rate of 34.5 per cent, a decline compared to 38.8 per cent recorded in the 2018/19 financial year,” said CoB.

By December 2019, the government should have spent 50 per cent of the money allocated. The absorption rate of the development budget is against 55 per cent absorption rate of the recurrent budget.

Consolidated Fund

During the half-year, total government expenditure was Sh1.3 trillion of which Sh544 billion was recurrent, Sh263 billion development while Sh443 billion went to the Consolidated Fund Services.

CoB’s analysis of the recurrent expenditure shows that personal emoluments at Sh215.4 billion took the largest share (39.6 per cent), followed by transfers to semi-autonomous State agencies at Sh187.8 billion or 34.5 per cent of the gross recurrent expenditure.

Other areas that took a substantial chunk of the recurrent budget include travelling (Sh8.9 billion) and hospitality (Sh2.6 billion).

According to CoB, the dismal absorption of development budget was due to delay in release of development funds by Treasury.

CoB also said State agencies have been slow in uploading their procurement plans as well as the suspension of capital expenditure by entities at the beginning of the financial year.

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