Government has a major problem spending the money available

[This fundamentally creates room for corruption in the haste to "spend" allocated funds before next budget is read. It robs citizens their right to essential services, development, and prosperity. I would have critiqued the government a little more harshly. I am writing a short comment on a effort the ICT Consumers Association of Kenya, if the government ever agreed to grant us a Registration Certificate, would significantly if not totally address this problem. All while we remain in an official recognition limbo, then focus shifts to whether Consumer Protection is National(s) threat]

[Daily Nation]
Story by JAINDI KISERO
Publication Date: 2007/06/06

THE ANNUAL RITUAL OF the national budget is with us again. Since it is the last budget in President Kibaki’s first term, it is an opportune time to reflect on some of the highlights of what has happened to budget-making in the last five years.

First, we need to dispel the myth that tax collection has improved so much that we no longer need money from donors.

There is a big difference between “budget support” and “project support”. The latter refers to specific donor-financed projects such as roads or hospitals, while the former is discretionary money the Government can use to fund its recurrent budget.

It is also true that dependence on donor money for the budget has diminished in the last five years. But to state that Kenya has reached a stage where it can function without money from international finance institutions is to perpetuate a popular myth.

I have just been looking at the latest instalment of the Public Expenditure Review produced by the Ministry of Planning and National Development.

The current instalment is for the year 2006, and it shows clearly that international lending institutions and bilateral donors still fund 50 per cent of our development budget.

When these ministers tell you that they have not “factored” donor money into the budget, it is a blatant lie.

How has the Government fared in terms of allocating more money to capital development vis a vis consumption?

There has been a great deal of progress. In my view, one of the most significant achievements by the Kibaki administration in this regard has been to put more money into the development budget.

In absolute terms, development expenditure increased from Sh35.5 billion in 2002/ 2003 to Sh45.6 billion in 2005/2006. This is an important departure from past practice in which successive budgets devoted very little money to capital development. We had reached a point where the development budget had completely become a donor affair.

The flip side of these positive developments, however, is that we still have major problems spending the money that has already been allocated for projects in the budget.

The evidence is aptly illustrated in the new Public Expenditure Review that I allude to above. According to this document, the pace at which resources devoted to capital expenditure are utilised is still painfully slow.

The report adds that where the money is spent, it does not come through until the end of the financial year. What is the point of allocating too much money to a project only to return the funds to the Treasury unspent?

CLEARLY, THE PROBLEM HERE IS weak budget execution. No other sector illustrates this problem better than the roads sector. Consider the following:

The gross development budget for roads has increased from Sh17.7 billion in the financial year 2005/2006 to Sh32.7 billion in the financial year 2006/2007 -- an increase of more than 85 per cent within one financial year.

However, the ministry has been unable to spend all the allocated funds. Granted, the number of projects that are up and running are more than there has ever been in recent history.

But you still can’t defend a situation where a ministry is not able to absorb billions in allocated funds especially in the context of a national roads maintenance crisis.

In future, one of the things we will need to look at afresh is the role of the Kenya Roads Board (KRB). Which roads should be funded by KRB and which ones should not?

We may also need to rethink the policy of allocating 24 per cent of the total roads funds among the so-called district roads committees.

Since the number of districts change depending on the tenant at State House, we are soon going to end up with a situation where the funds from KRB are spread too thin to make any impact.

Another area where we have not made much progress is in containing the growth of the wage bill. As a percentage of the total recurrent expenditure ,the wage bill increased from 38.6 per cent in 2002/2003 to 41.3 per cent in 2004/2005, before declining to 36.4 per cent in 2005/2006.

Is it, really, sustainable to spend more than 36 per cent of your total recurrent revenue on paying salaries? Were the Government a private company, the wage burden would have pushed it to insolvency.

Yet we still hear politicians and the Electoral Commission of Kenya talking about increasing the number of constituencies before the end of year!

The political sector, especially Parliament -- a net consumer of taxes -- is already gobbling too much of our money. More constituencies will only mean more tax-free six-digit salaries and more fuel-guzzling monsters on our roads, for which we pay taxes.

Do we need more constituencies? Maybe. But the truth is that we can’t afford them. The Public Expenditure Review should be a must read for all those running for president in December.

[Daily Nation]
Government has a major problem spending the money available