Low development spend is hurting the economy

National treasury building in Nairobi. FILE PHOTO | NMG 

By EDITORIAL
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Summary

• The low absorption of development funds has been attributed to delayed disbursement by the Treasury, which consequently affected the procurement of goods and services.
• The upshot is that private sector players, who, ideally are contracted to undertake work by various government agencies, were denied the financial resources they needed to create jobs and engage in economic activities.
• Unless such delays occasioned by the Treasury are tackled, they will keep adding to the country’s economic woes.

The revelation that government ministries, departments and agencies (MDAs) only spent 14.2 percent of their development budget allocation in the first quarter of the current financial year is worrying, especially at a time when the country is experiencing an economic slowdown.

New data by the Controller of Budget shows that spending on development amounted to Sh99.7 billion in the first three months of the year while recurrent expenditure stood at Sh229.5 billion, meaning that the government spent one shilling on development for every two shillings it spent on recurrent expenditure.

The low absorption of development funds has been attributed to delayed disbursement by the Treasury, which consequently affected the procurement of goods and services. The upshot is that private sector players, who, ideally are contracted to undertake work by various government agencies, were denied the financial resources they needed to create jobs and engage in economic activities.

Unless such delays occasioned by the Treasury are tackled, they will keep adding to the country’s economic woes. The fact is that the government is the biggest consumer of goods and services from the private sector and any slowed spending on projects directly stifles the prospects of economic growth.

Higher spending on development projects spurs economic activity, helping create job opportunities and grow government revenue through taxes. Unfortunately, poor absorption of development budgets has become the norm in the recent times and the consequences of this on the country’s economic progression is all too evident. That is why the Treasury and MDAs should as a priority put their house in order and streamline the budgeting system to eliminate hitches that frustrate development spending.

In the first quarter of the year there was confusion about implementation of projects in the wake of a presidential directive that the MDAs finish projects already in progress before initiating new ones. There was also slow uploading of procurement plans and budgets into the Integrated Financial Management Information System (IFMIS) and discrepancies between the Integrated Payroll and Personnel Database (IPPD) and IFMIS data. These hitches should be ironed out expeditiously so that more money can flow into the economy through development projects and related subsidiary activities.

Budget management requires discipline and parties involved should act rationally at all times as it goes without saying that the economy cannot flourish without adequate spending on development.