COSTLY CUTS

House budget team faults Yatani's austerity measures

MPs demand fresh review of austerity measures citing counter-productivity

In Summary
  • MPs warn that the cuts will make it difficult for the government to meet its revenue projection targets for the next financial year.
  • Owing to the cash crisis, Parliament voted to retain the budget ceilings at figures agreed upon in the 2019 BPS.
Treasury Building
Treasury Building

A parliamentary committee now says the austerity measures being pushed by the National Treasury could be counterproductive.

The Budget Committee, in its report on the Budget Policy Statement (BPS 2020), said budget cuts spearheaded by Cabinet Secretary  Ukur Yatani is  as recipe for trouble.

The Kimani Ichung’wa-led team said development budget cuts will affect government investments in 2020 and in the medium term.

 

According to the BPS, development funding has contracted by Sh143.5 billion while recurrent expenditure has increased by Sh21 billion.

The team said while it is is important to spend on development, there should be a critical review of the government's expenditure.

The committee prefers the reductions to be focused on non-core expenditure areas adding that the cuts will stage delays in ongoing projects, escalate number of stalled projects hence increase pending bills.

They warn that the cuts will make it difficult for the government to meet its revenue projection targets for the next financial year.

Treasury has already instituted cuts on teas, newspapers , advertising, travel  and other unnecessary operational expenses.

Compounding the already drying cash taps is that exports have continued to steadily decline for the past decade.

“Our foreign reserves are being driven by foreign remittances as opposed to earnings from exports. A negative shock could adversely affect Kenya’s foreign reserves,” the Budget and Appropriation Committee report reads.

 

The committee is also concerned over the implementation of President Uhuru Kenyatta’s flagship projects iunder the Big Four agenda.

It said at the slow pace at which flagship projects are being implemented they may not be completed within the provided timeframe.

Among these is the common effluent treatment plant at Kinanie Leather Park which is only 30 per cent complete yet it was expected to be done by 2021.

Dongo Kundu SEZ and Naivasha Industrial Park have set targets of 40 and 30 per cent completion rates respectively for the current financial year.

Ichung’wa's team were also pessimistic at the  realisation of the Affordable Housing project as only 228 units have been put up against the target of 500,000.

The team said with revenue forecast revised downwards to Sh33.4 billion and other tax sources – including income tax, shrinking by Sh136 billion, it is uncertain how Jubilee would raise cash for projects.

The MPs were equally concerned why the national government has been unable to meet its revenue targets for the past ten years yet the economy has continued to expand.

The Agriculture department equally has a number of irrigation projects that are off-track as they are yet to cover the targeted acreage.

The MPs further cited uncertainties in the 100 per cent roll out of the Universal Health Coverage owing to the troubles facing health insurer NHIF.

“Given the critical role Big Four agenda has in promoting economic growth, the government should be more purposeful in implementing the programmes,” the committee said.

They want proper identification of projects, detailed implementation framework, adequate resources allocated as well as clear monitoring and evaluation.

MPs also picked holes on debt guarantees extended to non-performing entities saying they are part of the country’s cashflow problem.

For instance, the government would be forced to pay Sh305 million loan guaranteed to non-performing Tana and Athi River development authorities; and East Africa Portland Cement.

“There is need to map every loan contracted by the government to its application in the budget. We therefore want list of projects benefiting from externally borrowed loans to be brought to Parliament,” the lawmakers said.

Owing to the cash crisis, Parliament voted to retain the budget ceilings at figures agreed upon in the 2019 BPS.

In this regard, the BPS 2020 sets Sh39.14 billion ceiling for Parliament, Sh19.05 billion for Judiciary, and Sh1.8 trillion for the Executive.