Rotich defies MPs and raises budget for State projects

Worried that ongoing projects would need Sh3 trillion over eight and a half years, the House had asked Treasury not to finance any new projects.

National Treasury Cabinet Secretary Henry Rotich during a Liason Committee hearing looking into supplementary Budget estimates at Parliament Buildings on April 13, 2016. PHOTO | DIANA NGILA | NATION MEDIA GROUP 

In Summary

• Majority of the increases from what Parliament approved in the policy statement have gone to development projects.
• Energy and Petroleum ministry's development budget was increased from the Sh89.1 billion recommended by Parliament to Sh120.1 billion.
• The development budget of Transport and Infrastructure dockets has been increased by Sh95.6 billion.
• Lapsset was among projects started by retired President Mwai Kibaki that have not continued at the pace initially anticipated.

By JOHN NGIRACHU
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By VINCENT ACHUKA
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Treasury Cabinet Secretary Henry Rotich has defied Parliament and broken the ceilings MPs set in the Budget Policy Statement to allocate funds to projects considered important by the Jubilee government.

With the current administration going into its last full financial year in charge, the majority of the increases from what Parliament approved in the policy statement have gone to development projects.

The trend conforms to the view previously expressed by the Parliamentary Budget Office that the government would be expected to increase investment in infrastructure in the pre-election year.

Among the projects considered important by the coalition is the completion of the Standard Gauge Railway, whose construction is funded by China, and which is projected to be finished by June 2017.

In total, Mr Rotich broke the ceilings set by the National Assembly in the Budget in 41 out of 87 votes spread across the recurrent and development expenditures in the ministries and independent offices.

LAPSSET

Among the big beneficiaries is the Energy and Petroleum ministry, whose development budget was increased from the Sh89.1 billion recommended by Parliament to Sh120.1 billion.

In brief explanations on why the budget ceiling was broken, Mr Rotich indicated that the money would go to installation of transformers in constituencies, improvement of liquid petroleum gas distribution network and to the street-lighting programme.

The development budget of Transport and Infrastructure dockets has been increased by Sh95.6 billion.

MPs had approved a budget ceiling of Sh227.9 billion but Treasury has allocated the ministry Sh323.5 billion for development.

Under the Department on Infrastructure, the money will go into construction of 5,000 kilometres of roads, most of them under the delayed annuity programme.

Treasury also sought to assuage the fears of MPs, such as Transport Committee chairman Maina Kamanda and his Energy Committee counterpart Jamleck Kamau, that the Lamu Port South Sudan Ethiopia Transport corridor project had been abandoned.

The project has been allocated Sh10 billion, which should go into the construction of one of the three berths.

Kenya’s ambitions in that direction took a major hit over the past two weeks after Uganda said it would build its oil pipeline through Tanzania rather than Kenya.

Lapsset was among projects started by retired President Mwai Kibaki that have not continued at the pace initially anticipated.

Treasury has also set aside Sh13.7 billion for the implementation of the pledge by President Kenyatta that all remaining internally displaced persons (IDPs) would be resettled by allocating the Devolution ministry Sh13.7 billion for that.

Under recurrent, the largest variance from the limits set by Parliament is in the Department for Interior, which was allocated an additional Sh5.4 billion.

Parliament had set the limit at Sh98 billion while Treasury has allocated it Sh103.4 billion. Mr Rotich’s explanation is that this is for security operations.

Spurred by concern over the approximately 1,000 ongoing projects that would need Sh3 trillion over eight and a half years, the MPs had also asked Treasury not to finance any new projects until the current ones are finished.

Mr Rotich said no new projects except “very critical ones aimed at addressing emerging challenges” have been allocated funding.

“We have allocated resources to projects which are near completion to ensure that citizens enjoy the benefits that accrue from them,” Mr Rotich told Parliament in the notes accompanying the estimates.

The National Assembly had also asked Mr Rotich to set aside Sh1 billion for projects under the Economic Stimulus Programme in areas that had not benefited before. Mr Rotich said Sh500 million has been allocated for the completion of fresh produce markets.

For development spending, Sh410 billion is expected to come from domestic spending but the failure to reduce spending is bound to pile pressure on the Kenya Revenue Authority (KRA) and technocrats at Treasury on how to raise the Sh2.27 trillion without sinking the country into further debt.

Mr Rotich had in January indicated that he would slash government spending in the next financial year by up to Sh60 billion to rein in the ballooning budget deficit currently amounting to 8.7 per cent of GDP.

But with 16 months left to the General Election, it appears the government is under pressure to implement the promises it made during the 2013 presidential campaigns.

Also, it is under pressure to complete the pending initiatives set under Medium Plan 2 of Vision 2030 whose deadline is the end of next year.

Under the proposals released to Parliament, Treasury said it expects KRA to increase its revenue collection to Sh1.37 trillion, from the Sh1.18 trillion it had set as the target in the current financial year.

“Much progress has been achieved towards broadening the tax base and improving revenue administration. We have simplified and modernised VAT legislation, Excise Duty and tax procedure legislation while a review of the Income Tax Act has commenced,” said Mr Rotich.

MISSED TARGETS

However, KRA has for the past three years failed to meet its tax targets.

Among Treasury’s stated objectives in the Budget is to improve KRA’s information system security to reduce the number of data security breaches. It also plans to restructure the authority so that it leads border control units and stems smuggling.

A consulting firm has also been contracted to scrutinise KRA’s way of working and improve it.

The government at the beginning of the month announced it had reached an agreement with China for a Sh60 billion loan to plug a budget deficit it is facing for the current financial year after KRA said taxes collected were below a nine-month target of Sh911.6 billion by a significant Sh69 billion.

UNREALISTIC PROJECTIONS

It remains to be seen whether KRA will attain the revenue collection targets set but experts say the projections are unrealistic.

“Economic growth has stagnated because of clear cut policies in investment and the net effect is a reduction in revenue collection which has prevented the government from fulfilling its pledges,” said Dr Samuel Nyandemo of the University of Nairobi’s School of Economics.

In spite of this situation, the proposed budget does not appear to have factored in most of the promises by the government that remain unfulfilled.

Key among them is the development of ICT incubation hubs in all counties, provision of free milk to every school-going child, a guarantee that every family has access to a fully equipped health centre within five miles of their home, construction of five new stadiums in Kisumu, Mombasa, Nakuru, Eldoret and Garissa, and increasing the paved road network from 11,000km to 24,000km.