Uhuru's grand plans imperiled by cash crisis

Government reduces project funding to free money for salaries and operations.

In Summary

• Cash-flow crisis has pushed the Jubilee administration to drastically reduce funding legacy projects.

• Normally, the Treasury should have released as much as 50 per cent of the annual budgets by the end of the first half of the financial year. But this is far from normal.

President Uhuru Kenyatta during a past briefing at State House, Nairobi.
President Uhuru Kenyatta during a past briefing at State House, Nairobi.
Image: PSCU

President Uhuru Kenyatta’s legacy projects are in trouble after a grave cash crunch hit the government – barely 20 months to end of this tenure.

The Star has established the government faces a cash-flow crisis forcing the Jubilee administration to drastically reduce funding for mega development and other projects to free up cash for salaries and other expenses.

A new report by Controller of Budget Margaret Nyakang'o on exchequer releases by the National Treasury reveals development projects have been hit hard as the financial crisis ravages the government.

The report shows  the National Treasury has released only Sh140.57 billion to Ministries, Departments and Agencies (MDAs) for development against an annual allocation of Sh387.92 billion as of Monday this week.

This translates to about 36 per cent of the total allocation, with only five months to the end of the financial year.

With the cash flow stumbling block, there is no guarantee the Treasury will be able to disburse the remaining amount– 64 per cent – by June 30 this year.

Normally, the Treasury should have released as much as 50 per cent of the annual budget by the end of the first half of the financial year on December 31, 2020.

However, the report indicates some of the President’s Big Four projects -  mostly domiciled in the giant Transport, Housing,  Infrastructure and Public Works Ministry headed by CS James Macharia - have received full funding.

For instance, Transport Department has received Sh12.46 billion out of the Sh11.27 billion it was allocated, surpassing the annual allocation by 13 per cent.

Housing has received Sh12.13 billion out of total budget of Sh14.94 billion.

The Ministry of Health charged with overseeing the rollout of Universal Health Coverage – one of the President's Big Four projects – has only received Sh6.05 billion out of Sh43.59 billion since July last year.

This translates to 14 per cent.

The Department of Agriculture, Fisheries and Blue Economy, which mainly deals with food security, has only received Sh895.69 million out of Sh4.61 billion while department of Trade has received Sh361.21 million out of Sh1.09 billion budget for the year.

The Departments  of Infrastructure, Public Works, Environment and Forestry and Industrialisation which are implementing the big projects have received 39 per cent (Sh21.31 billion out of Sh61.60 billion); 47 per cent (Sh474.73 billion out of Sh1.01 billion); 43 per cent (Sh1.64 billion out of Sh3.83 billion) and 32 per cent (Sh1.19 billion out of Sh3.75 billion) of their annual allocations, respectively.

The Ministry of Education has received 44 per cent of its development allocation, while that of Water, Sanitation and Irrigation – that is implementing some of the big dam projects – has received only Sh9.58 billion out of Sh36.26 billion or 26 per cent of the annual budget.

In a sharp contrast, the Treasury has released Sh485.02 billion or 45.4 per cent of Sh1.06 trillion allocated for recurrent payment of salaries and other expenses in the 2020-21 financial year.

The situation is even worse in counties, exposing the level of the cash crisis in government when it is struggling to meet its debt obligations to avoid sanctions and other penalties.

Currently, the country’s debt portfolio stands at Sh7.1 trillion with some of the loans falling due this year.

On Monday, Kenya received a debt repayment relief from Paris Club Creditors to delay due loans worth Sh80 billion to the end of June. This after the government requested for suspension of the loans.

Kenya has been listed among 23 countries at risk of debt distress following heavy lending from China and other international lenders.

The devolved units have received only Sh126.05 billion, an equivalent of 34 per cent of Sh373.59 billion they were allocated for the fiscal year.

“It is a serious concern to us because if the counties and even the MDAs do not have the money, then budget implementation is not going on the way it is expected,” Nyakang'o said.

The revelations emerged just a day after the Council of Governors threatened legal actions and shutdown of services to compel the National Treasury to released their cash.

CoG chairman Wycliffe Oparanya said in a letter to Treasury CS Ukur Yatani that the devolved units have not received Sh94.7 billion, an amount meant to meet the counties’ expenses for four months.

“Please note that if the disbursement is not made forthwith, the county governments will have no option other than seek legal redress while closing down to minimise further damage and suffering to employees,” Oparanya said in the letter.

He reiterated that the delayed disbursement has hindered service delivery during the Covid-19 pandemic when the counties are the expected to be at the front line in health services.

In addition, county government civil servants have not been paid salaries for three months unlike their national government counterparts who have been paid all their dues and statutory deductions made.

Late last year, CS Yatani admitted that the government was facing cash flow problems owing to increased demands and lower collections by the Kenya Revenue Authority  due to the Covid-19 pandemic.

The report indicates that Nairobi, Nakuru, Lamu, Baringo, Kakamega, Mombasa, Samburu, Uasin Gishu and Turkana have received the least amount – between 20 and 30 per cent - of their annual allocations.

Nairobi City County, whose crucial functions were transferred to National government, has received only Sh3.59 billion or 21 per cent of its total allocation of Sh16.8 billion.

Nakuru has received 22 per cent (Sh2.86 billion out of Sh12.97 billion); Lamu has got Sh845.27 million out of Sh3.27 billion or 26 per cent; Baringo has received 25 per cent of Sh5.73 billion and Kakamega has got Sh3.66 billion out of Sh12.11 billion.

Mombasa has received 27 per cent of Sh9.48 billion; Samburu has received Sh1.38 billion out of Sh5.44 billion while Uasin Gishu and Turkana have each received 25 per cent of their annual allocations.

Other counties facing a cash crisis as a result of late releases are West Pokot (25 per cent), Vihiga (32 per cent), Machakos (35 per cent), Kilifi (34 per cent) and Kiambu (36 per cent).

Wajir, Nyandarua, Tharaka Nithi, Nyamira, Narok and Laikipia counties have received the highest amounts at 40 per cent each.

(Edited by V. Graham_