State fails to spend Sh206bn in Budget

Money Markets

The National Treasury building in Nairobi. PHOTO | FILE 

By GEOFFREY IRUNGU, girungu@ke.nationmedia.com

In Summary

• Treasury says Judiciary and Parliament did not spend Sh35 billion in recurrent expenditure.

The national government failed to spend Sh205.8 billion in the financial year ended June with operations and maintenance registering the largest non-absorption.

According to new data from the Treasury, the Judiciary and Parliament together failed to spend Sh34.6 billion in recurrent expenditure — which is normally on wages and salaries, pensions, operations and maintenance.

“The total expenditure and net lending for the period under review amounted to Sh1.616 trillion, against a target of Sh1.822 trillion,” said the Treasury in the quarterly report on the economy and budget execution.

Failure to absorb resources affected both recurrent and development expenditures within the various ministries, departments and agencies.

“The shortfall of Sh205.8 billion was attributed to lower absorption recorded in both recurrent and development expenditures by the national government,” said the Treasury.

Low spending among ministries, departments and agencies has been blamed for the sluggish economic growth despite the government maintaining a medium-term target of 7-10 per cent in terms of the growth of the gross domestic product.

“Underperformance [was] recorded in wages and salaries, pensions, and operation and maintenance which accounted for Sh4.9 billion, for Sh1.9 billion and Sh66.9 billion, respectively,” said the Treasury.

One of the reasons often cited for the failure to meet targeted expenditure is the procurement processes that tend to be time-consuming.

“Our procurement processes have become much more stringent unlike in the past and this has affected our ability to spend what has been allocated,” said Nikhil Hira, a partner at tax and financial advisory firm Deloitte East Africa.

Mr Hira said even when the process has resulted in someone or a company being awarded a tender, there are times some parties go to court or appeal at the procurement tribunal for a review of the process.

For example, the much-talked-about laptop projects for primary schools has not taken off, thanks largely to numerous appeals about the process of tendering. There are numerous other cases before the courts relating to tender awards.

As a result of the slow process of procuring goods and services, the Treasury launched an e-procurement module (portal) within the Integrated Financial Management Information System in July to improve on the speed of contracting supplies and concluding settlements or payments.

The impact of the e-procurement system on absorption of funds allocated in the Budget is expected to be known when figures on spending in the first quarter of the fiscal year 2015/16 are released towards the end of the year. Another factor that has affected absorption is a lack of funds when needed for spending.

“There are cases where cash is not available for the projects to which it has been allocated. Eventually this will be indicated as funds that were not absorbed, but the fact is that the cash was not there in the first place,” said Mr Hira.