The Government should cut wastage in the public sector and trim the wage bill if attempts at fiscal consolidation are to bear fruit. This is according to the Kenya Economic Update, 2018 where the World Bank further cautioned that the country’s economic growth was threatened by budget cuts to development expenditure whereas the focus should be on cutting recurrent spending.
“A path where much of the burden of fiscal consolidation is disproportionately shouldered by development spending, as is the case in Kenya, undermines the underlying growth potential of the Kenyan economy,” said the bank. “In this regard, there is a need to recalibrate the balance between development and recurrent expenditures, with the latter bearing a higher share of the expenditure containment.
” While presenting the budget for the 2018/2019 financial year earlier this year, Treasury Cabinet Secretary Henry Rotich revealed the formation of a Public Investment and Management Unit to appraise development projects before allocation of funds. At the same time, President Uhuru Kenyatta ordered a freeze on new development projects as the first of a raft of austerity measures that preceded the supplementary budget. Borne little fruit.
However, these efforts have borne little fruit with both the national and county governments criticised for propagating nonessential expenditure and wastage. On Tuesday, for instance, the Government called for bidders to supply a private aircraft and helicopter for the Deputy President, while last week it was revealed that the military had procured nine aircraft, raising questions on State commitment to cutting public spending. The World Bank now says bold decisions have to be made and spending needs to be cut on the recurrent budget if the Government is to fulfill the Big Four agenda.
“Specific areas that could be considered to rein in recurrent spending include lowering of transfers to State-owned enterprises, cleaning and regular audit of the payroll register, keeping wages, salaries and allowance adjustments in line with recommendations from the Salaries and Remuneration Commission (SRC), and maintaining frugality in operations and maintenance expenses,” it said in the report.
Financial reports from State corporations show taxpayers are owed more than Sh15 billion in non-performing loans lent out to parastatals and Government agencies, some of which have since become defunct. The Local Government Loans Authority carries the biggest chunk of the debt at Sh7.5 billion, with the National Water Conservation and Pipeline Corporation owing Sh2.4 billion.
Majority of the parastatals that hold Treasury’s non-performing loans are in the agriculture sector with debt that stretches back decades. The Kenya Meat Commission is the largest debtor with Sh940 million in non-performing loans, while sugar millers Sony and Nzoia, owe the Government Sh199 million and Sh168 million respectively.
In 2013, President Uhuru promised to initiate a parastatal review process targeting moribund institutions and those whose functions had been devolved and merge duplicated public agencies. This has not been achieved, with recommendations of a 10-member task-force appointed to lead the reforms now gathering dust.
Kenya:World Bank Warns Treasury on Development Budget Cuts https://t.co/ct9lSsJO8a pic.twitter.com/KuovBLe3rP
— Global Issues Web (@globalissuesweb) October 11, 2018
[BUSINESS] World Bank warns Treasury on development budget cuts: The World Bank is cautioning that Kenya’s style of cutting development budget to reduce budget deficits and borrowing amid hitches in disburseme.. https://t.co/awBDSmOBq7
— Breaking News (@News_Kenya) October 10, 2018