National Treasury CS Henry Rotich on the spot over extra Sh215 billion in foreign loans

National Treasury Cabinet Secretary Henry Rotich is on the spot for seeking an extra Sh215 billion from donors even though the country cannot spend such an amount in one financial year.

The Kenyan office of the International Budget Partnership (IBP) — the global lobby that deals with budget transparency — slammed Rotich and National Treasury mandarins for accepting donor money totaling Sh410 billion when the numbers show Kenya has never absorbed anything above Sh195 billion in 12 months.

“... going by historical absorption uptake, the received commitments are not expected to be wholly absorbed during the year,” said Rotich, as he confirmed that the only money that will be spent this time round is Sh195.2 billion.

It is that confession to MPs, included in the national budget, that has economists and fiscal experts worried. Dr Jason Lakin, the country manager of IBP-Kenya, and John Kinuthia, a research analyst at the same firm, said the Sh2.26 trillion budget for the next financial year, 2016-17 was “unrealistic”.

Large deficit

“This is an important disclosure. However, it appears that Treasury proposes to go ahead with its unrealistic budget in spite of this caveat. Why approve a budget that is much bigger than we are likely to spend, and that has a much larger deficit than we are likely to realise,” said Kinuthia at a meeting in Nairobi.

The money from all revenues is estimated at Sh1.5 trillion.

The biggest problem, the experts said, is in the colossal Sh689 billion funding gap. The experts warned that this was a signal that the National Treasury will seek to borrow more to ensure the Jubilee administration delivers on its campaign pledges ahead of the 2017 elections-, which is only 14 months away.

The question is why Rotich is whetting the country’s debt appetite, at a time when the International Monetary Fund (IMF) has warned that the Sh3.2 trillion debt that Kenya owes the world needs to be managed or else the country will find it hard to pay back.

At a meeting in a Nairobi hotel, attended by MPs who sit in the powerful Budget and Appropriations Committee, the global budget lobby said the government had questions to answer about the rising debt, whose repayments take up one-third of revenues.

The huge hole, according to documents from the National Treasury, will be filled through domestic and foreign borrowing, meaning that it will not only sink Kenya into debt, but will also to expose the country to more economic strain.

“We expect new loans, concessional loans. You can call it borrowing, but eventually, it is the taxes which Kenyans pay, that pays back these loans with interest,” said Dr Lakin. The budget experts also pointed out that the target of 2.8 million tourists was way too ambitious. They said the Economic Survey 2016 showed that the country had attracted 1.18 million tourists and it was impossible to double that number in the next financial year, when the budget for tourism had been slashed by Sh4 billion. In the last financial year, the country had targeted 2.4 million tourists.

The National Youth Service (NYS) allocation has been slashed, but the targets remain the same, raising fresh queries about over-pricing.

Dr Lakin and Kinuthia said the cut from Sh25 billion to Sh17 billion ought to have been accompanied by a review of the targets.

The global budget lobby said the government had questions to answer on why there is no change in the targets, even with the Sh8 billion drop.

“We have less money, yet the targets remain the same. There are only two explanations: The first is that, we had previously overpriced everything; or that this is a mistake in the document of the National Treasury, which makes the target unrealistic,” said Kinuthia.

Development projects

The target for the current financial year is for NYS to get 21,870 youth trained in paramilitary skills, and to have 150,000 youth trained in social transformation.

“The Sh8.1 billion is almost half the money the government spends on Free Primary Education,” said Kinuthia.

In the next financial year, the government has set aside Sh18.6 billion for the free learning programme in public primary schools, and it targets 9.6 million pupils.

NYS has been dogged by corruption claims, which swept away former Devolution Cabinet Secretary Anne Waiguru, former PS Peter Mangiti and former Director General Nelson Githinji. They all left office with a cloud of suspicion hanging over their heads following the confirmed theft of Sh791 million.

In the next financial year, the government wants to roll out the NYS programme in 90 constituencies. The NYS has also projected that it will ensure 93,000 youths are trained on how to get “gainful employment”.

The budget for the NYS includes Sh5.3 billion set aside for the suppliers of goods and services, and Sh1.06 to pay the staff and pay stipends to the recruits; plus there is Sh10.9 billion for development projects. The total allocation is Sh16.9 billion.