Public Management Bill to stifle financial devolution

By Billow Kerrow

The massive media campaign by the Office of the Deputy Prime Minister and Ministry of Finance on the proposed Public Financial Management (PFM) Bill reveals the vested interests at Treasury and their determination to see their liberal version of the Bill adopted.

Undoubtedly, the Treasury mandarins wish to continue centralising power at national level and hence their irrational devotion to enhancing its role, functions and powers in the Bill. Regrettably, part of their pressure comes from IMF that provided technical assistance for the development of the Bill in pursuit of its interests.

The Devolution Taskforce set up by Local Government Ministry has good cause to worry; the Bill provides a stealthy way of emasculating the county government by trivialising devolution of finance functions, and resources.

CIC and civil society organisations have all raised the red flag over the Bill and others that are equally contentious relating to contingencies funds and national loans and guarantees. As expected, the principals who are hamstrung by existing IMF conditions have backed the Treasury, sacrificing critical national values and goals that underpin public financial management.

As the former chairman of the technical committee that drafted the public finance chapter in the Bomas Draft, I can say without any fear of contradiction that the Bill negates the spirit of the aspiration of Kenyans as detailed in the report of the defunct CKRC.

The violation started through a spirited campaign by the Treasury in Naivasha in 2010 when the Committee of Experts (CoE) and a parliamentary team were developing the final draft Constitution. Indeed, a comparative review of the Bomas and the CoE drafts reveals the extent of the weakening of this chapter at the behest of the Treasury.

Understandably then, the drafting of the Bill by Treasury creates a conflict of interest, in which public good is ignored in the interest of the political expediency and vested interests. At the core of public finance reform is equitable resource allocation, between the national and county governments and amongst the counties themselves.

The Constitution spells out a detailed criterion for sharing resources, and empowers the Senate and the Commission on Revenue Allocation to be the key determinants in this regard. I have no qualms about revenue collection provision in the Bill.

Generally, all nationally applied revenues such as VAT, income tax, custom duties and excise taxes are to be imposed and collected by the National Government. The percentage of this revenue to be shared out is also based on explicit formula to be set by the Senate as provided for in Article 203 of the Constitution.

But Section 9 of the Bill gives the widest possible definition of the functions of the Treasury, which infringes on the independence of the counties.

Section 10 gives Treasury wide powers over the counties that may be abused to control specific counties. In Section 11, Treasury has diluted significantly the fiscal responsibilities principles sought by Chapter 12 of the Constitution.

For instance, the limits on borrowing, recurrent expenditure and Public Wage Bill were left for the Cabinet Secretary to determine through regulations. Under Section 38, Treasury will not require prior approval of Parliament to borrow or provide guarantees, a position that IMF prefers.

Moreover, there is no provision in the Bill that seeks to ensure such national debt will benefit all counties equitably.

Whilst restricting loans and guarantees to counties generally, Treasury may borrow loans for projects and programmes in specific counties discretionally, exacerbating the inequitable resource allocation the Constitution had set out to address.

Whilst it is important for the Treasury to ensure accountability in public financial management, it is also vital the Bill does not give it unfettered control and discretion that will undermine the vibrancy and independence of the counties. To achieve this, it must devolve its functions adequately.

The writer is a former MP for Mandera Central and political economist