Treasury keen to tame wastage with lean development budget

After investing heavily in infrastructure in the past nine years, the government is keen to cut funding of new mega projects in the next financial year, Treasury has indicated.

This is reflected in National Treasury CS Ukur Yatani's 2021/22 budget where he has proposed an allocation of Sh669.6 billion as a total sum for development expenditures, including foreign financed projects, allocation to Contingencies Fund and conditional transfers to County Governments.

Recurrent expenditure takes the lion share of the Sh3.6 trillion budget for the financial year starting July1.

“This funding (development expenditure) is expected to accelerate completion of ongoing critical infrastructure projects in the country,” Yatani said during the budget reading at Parliament on June 10.

Given the projected revenues and grants against the projected expenditures, Treasury is projecting the fiscal deficit for the financial 2021/22 budget at Sh929.7 billion equivalent to 7.5 per cent of GDP.

This is lower than the Sh976.2 billion equivalent to 8.7 per cent of GDP in the financial year 2020/21 ending June 30.

The deficit in the next financial year will be financed through net external financing of Sh271.2 billion equivalent to 2.2 per cent of GDP and net domestic financing of Sh658.5 billion, equivalent to 5.3 per cent of GDP.

Treasury shall closely monitor the impact of Covid-19 to the economy and accordingly adjust the fiscal plan, including tax measures, to ensure that the development agenda remains sustainably funded, the CS said.

“We shall carefully do this while limiting in-year adjustments of the budget for new projects except those of emergency nature. This will enhance certainty in the budget process and improve implementation of Government programmes and projects while adhering to the fiscal consolidation plan,” he said.

This signals no mega projects are targeted in the next financial year as government moves to complete existing multi-billion projects.

This is in line with President Uhuru Kenyatta's directive that no new projects shall be initiated until exiting ones are complete, to tame wastage in elephant projects.

The government has in the past nine years investment in the expansion of road networks, railways, seaports, airports and energy.

Theses have enhanced domestic and regional connectivity, boosted rural productivity and reduced urban congestion.

The investments include the Standard Gauge Railway and urban commuter rail in Nairobi, the on-going rehabilitation of meter gauge railway lines along various routes including Nairobi-Nanyuki, and Nakuru-Kisumu-Butere and the recently launched first berth in Lamu Port, a critical pillar of the LAPSSET corridor.

The government has also scaled up development of critical infrastructure in the country such as roads, rail, energy and water to reduce the cost of doing business and ease movement of people and goods as well as promote competitiveness.

Current focus is to make Lamu a free port for both domestic and trans-shipment purposes, Yatani has noted.

In addition, the government is establishing a disease-free zone in Lamu to support export of live animals and processed meat.

Further, the rehabilitation and subsequent use of Kisumu port will enhance efficiency in regional trade, Treasury says.

The government has also expanded energy generation and connectivity with over 7.5 million households today connected to electricity, compared to 2.3 million households in 2013.

The government has in recent times lost Sh72.5 billion in 545 stalled government projects valued at Sh365.9 billion, something CS Yatani is keen to tame going forwards.