•National Treasury's insincerity about the fiscal consolidation undermines credibility of the budget
Parliament has accused Treasury of consistently shifting its fiscal deficit targets upwards, driving the country deeper into debt.
A report by the Parliamentary Budget Office (PBO) dubbed ‘Unpacking the estimates of Revenue and Expenditure for 2019/20 and the medium term’, says the exchequer has been insincere about its fiscal consolidation, setting low fiscal deficit targets to hoodwink the public.
"The fiscal deficit in 2019/20 is projected at Sh607.8 billion or (5.6 per cent GDP). It should be noted however, that a low fiscal deficit has been a moving target for the government,’’ BPO said.
According to the report, Treasury has changed fiscal deficit targets for the upcoming financial year four times in the past two years.
It projected the 2019/20 deficit to be at 4.8 per cent in 2017 only to lower it to four per cent later that year.
Last year, it pushed back the 2019/20 deficit to 4.8 per cent only to shift it to 4.3 per cent later in the year to 4.3 per cent.
This was meant to impress the International Monetary Fund (IMF) which had issued Kenya with tough conditions among them fiscal consolidation in order to renew the renewal of its Sh150 billion precautionary facility to the country.
After expiry of the IMF precautionary facility last September, the Exchequer set the fiscal deficit for 2019/20 to a high of 5.6 per cent of GDP only to slash it to the current 5.1 per cent.
"the 2019/2020 budget is already higher than the BPS approved ceiling by Sh78 billion, indicating government’s propensity to spend despite the need for austerity,’’ BPO report said.
Higher expenditure levels have been accommodated through upward adjustments in the revenue projections from the Budget Policy Statement level by approximately Sh35 billion.
Total revenue in 2019/20 is projected at Sh2,16 trillion (19.7 per cent of the GDP) from the BPS 2019 projection of Sh2,08 trillion (18.3 per cent of the GDP).
"This masks the true deficit by seemingly maintaining it at the BPS level despite the higher expenditure adjustments. Should the economy not perform as expected, there is need to drastically reduce the budget through a supplementary,’’ PBO said.
The insincerity by National Treasury about fiscal consolidation undermines the credibility of the budget and is the main reason behind pending bills and stalling of projects.
Similar sentiments are shared by the Institute of Certified Public Accountants of Kenya (ICPAK) which warned that pending bills and development projects have the effect of crippling the government’s ability to deliver meaningful change for its citizens.
Speaking during the institute's ongoing 35th annual general seminar in Mombasa, ICPAK chairman Julius Mwatu said the government should consider accrual accounting as opposed to cash accounting to thwart perennial incidents of pending bills.