The state has developed a new policy to reduce financial risks involved in cushioning private sector investment projects.
In the policy called Government Support Measures 2018, the national Treasury will adopt a comprehensive framework to guide in partnership with the private sector players.
The government spends a lot of money supporting key investments by absorbing some of the risks involved in mega projects.
However, the policy states that government will only commit to take up liabilities of approved projects on the basis of affordability and sustainability, including projects budgeted for within the Medium Term Expenditure Framework or other approved planning cycle.
“Not all projects may be supported. The GSM shall be issued in exceptional circumstances for projects that are considered strategic and that are of public interest, as approved in principle by cabinet.”
“Government understands that GMSs impose various financial costs on public finance, and create varied forms of contingent liabilities on Government, with the risk that in the event such liabilities happen, their financial impact on public finance may become substantially disruptive,” the policy reads in part.
The policy applies to all public institutions, private sector parties involved in public investment programmes and their financiers.
It has come three weeks after the development budget was cut by Sh52 billion to Sh623 billion, defying the Public Finance Management Act 2012 that requires a minimum 30 per cent of the national budget be allocated to development.
The 2018 Budget Review Outlook also slashed county governments fund share from Sh314 billion to Sh305 billion in the current financial year, following a subsequent reduction in revenue collection targets from Sh1.94 trillion to Sh1.853 trillion. Treasury also reduced equalization fund meant for hardship counties fromSh9 billion to Sh5 billion.