A picture showing someone holding money.
Photo/DENISH OCHIENG
Low spending by counties in the first
three months of the current financial year has jeopardised the national
economic growth plan and cast a dark shadow on the government’s ambition
of achieving double-digit progression in the medium term.
A
report released by the office of the Controller of Budget last week
showed that none of the county governments hit the 25 per cent budget
absorption target, raising questions over their ability to deliver the
economic promise of devolution- stirring growth in the grassroots.
Worse
still, the report shows that, of the little funds the county
governments managed to spend, only seven per cent went towards
development expenditure while salaries and allowances took the biggest
portion.
“While devolution presents enormous
opportunities to change the livelihoods of locals by bringing services
closer to them and offering prospects to participate in governance,
ineffective county governments can undermine the benefits for the
citizens” Mrs Agnes Odhiambo, the Controller of Budget, says in her
report.
It is a trend that economic experts say puts
the country’s economic growth on the wrong footing and one that, if not
rectified, could kill the dream of achieving double-digit growth.
MISPLACEMENT OF PRIORITIES
Dr
Samwel Nyandemo, a senior lecturer in the Department of Economics at
the University of Nairobi, said it should worry Kenyans the misplacement
of priorities county governments showed in their spending in the first
quarter.
“Resources to counties are meant for
productive investment. It requires 30 per cent to be used on development
but what they have done is spent on unnecessary things in violation of
the laid-down procedures,” said Mr Nyandemo.
Mr Kwame
Owino, the CEO of the Institute for Economic Affairs, said spending on
development by most counties was a concern to counties but was unlikely
to affect overall growth figures.
“Counties have
started development spending on a slow pace, which is a concern because
they are spending so much on travel and allowances. But the bulk of
spending (up to 70 per cent) is by the national government,” he said.
SERIOUS CHALLENGE
The
World Bank, at the same time, has warned that low spending and other
‘teething transitional problems that prevailed last year pose a serious
challenge to the country’s growth targets.
“Assuming
that it overcomes the transitional issues that hindered spending in 2013
and continues to implement structural reforms that make it easier to do
business, it should grow at 5.1 per cent in 2014 and 6.0 per cent over
the medium term,” the Bretton Wood’s institution said.
“Domestically,
the fiscal risk emanating from the burgeoning wage bill, inadequate
implementation of the devolution process, and poor absorption of budget
funds could dampen GDP growth,” said the World Bank in the Kenya
Economic Outlook Update, December 2013.
Low uptake of
funds in the first quarter could be attributed to failure by most
counties to meet the conditions set for release of funds as stipulated
in the Public Financial Management Act, 2012.
Other
hiccups mentioned in the report by the Controller of Budget included
frequent adjournment of County Assemblies due to agitation for higher
remuneration by members, which affected approval of supplementary
budgets and Finance Bills for respective counties.
The
county expenditure review showed that a total of Sh7.1 billion was spent
on personnel emoluments, Sh4.9 billion on operations and maintenance,
and Sh900 million on servicing debts, leaving just Sh900 million for
development expenditure.
RAISING DOUBTS
The
revelations now raise doubts over the country’s ability to attain the 6
per cent growth projection by World Bank and the International Monetary
Fund, both of which pegged their growth forecasts on increased public
spending as the government rolls out development projects.
“Kenya’s
economic gains over the past few years have been nothing short of
remarkable. Coming on the heels of a delicate political transition,
growth remains robust — at more than 5 per cent in 2013.
We
expect the country to record even better growth going forward, powered
by an aggressive private sector and increased public spending,” IMF’s
managing director Christine Lagarde said at the end of her two-day visit
to Kenya last week.
But in a sharp contrast, out of the 47 counties, 27 did not even request any money for projects.
The
Controller of Budget, in her report, cited failure by the counties to
prepare expenditure plans in time as the reason for low absorption.
Between
July and September, revenue collected through taxes and fees by various
counties declined to Sh1.36 billion, down from Sh1.60 billion.
Counties
spent a total of Sh13.33 billion, which represented an average
absorption rate of 4.78 per cent. No county met the Q1 target of 25 per
cent, meaning a lot of programmes planned for the period never took off.
Of the total expenditure, Sh11 billion, which
represents 82.7 per cent, was spent by county executives and Sh2.31
billion, or 17.3 per cent, spent by the county assembly.
Counties
with the highest absorption rates were Bomet (12.3 per cent), Nairobi
City (10.8 per cent) and Trans Nzoia (7.0 per cent). Those with the
lowest were Mandera, Wajir and West Pokot.
RECURRENT EXPENDITURE
The
report showed that, in the first three months of the 2013/2014
financial year, counties spent billions on recurrent expenditure that
included local and foreign travel, hospitality and training.
Nairobi,
Mombasa, Narok and Bomet counties recorded the highest expenditure
while the lowest were West Pokot, Lamu, Elgeyo-Marakwet and Wajir
counties.
“The analysis shows that a total of Sh27.1 billion of the total revenue available remained unspent in the period under review.
This
low uptake of funds could be attributed to failure by most counties to
meet the conditions for release of funds as stipulated in the Public
Financial Management Act, 2012,” said the report in part.
The
Public Finance Management Act, 2012, Section 107(2) (b) requires the
counties to allocate at least 30 per cent of their budgets to
development activities over the medium term.
However,
what comes into picture from the expenditure review is a process that,
if not put on check, could end up eroding the same benefits of
devolution.
Most counties had not prepared their
annual procurement plans well in advance to ensure funds are immediately
utilised when disbursed. This, the Controller of Budget says, had a big
part to play in the slow absorption recorded.
Delays
in enactment of the County Allocation of Revenue Act 2013, which
affected disbursement of the national sharable revenue to the counties,
were also blamed for the low absorption levels.
NOT AFFECT NATIONAL GROWTH
Mr
Robert Bunyi, an economics expert, however, said the low development
expenditure by counties in the first three months of the year would not
affect national growth objectives significantly.
“The
amount of development expenditure for the first quarter by counties is
not sufficient to undermine the national growth outlook. These are
teething problems of the introduction of devolved public finance in
government,” he said in a telephone interview.
On the
other hand, the International Budget Partnership, an NGO that has been
doing research on devolution and budgeting, said lack of capacity at the
county level saw most counties taking longer to draw their development
budgets, which explains the low development spend.
PROVIDE CAPACITY AND STRONG TEAMS
“We
are not worried about low development spend for the first period. It is
the responsibility of the National Treasury, Ministry of Devolution and
Planning and the Transition Authority to provide capacity and strong
teams to manage those resources,” he said.
Council of
Governors chairman Isaac Ruto said low absorption of development funds
was because of bureaucracy involved in the tendering of government
projects.
Governors for Bungoma, Kisii and Kisumu
have faulted the report prepared between July and August last year,
insisting that counties started receiving money for development in
September.
All projects undertaken by the respective county governments were funded from recurrent budget, they said.
Most counties now say they have come up with developmental plans and called on the government to release all the funds.
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