Treasury takes a hit from draft law

Treasury will from next year be required to set aside billions of shillings from the national budget to supply water and electricity, build roads, and health facilities in Kenya’s under-developed regions if on-going constitution making efforts run to completion.

The Committee of Experts has included into the new law, a clause that will require the Finance minister to allocate 0.5 per cent of total national revenues “marginalised areas” every year.

The provision appears to have been inspired by the yawning gap between Kenya’s wealthy - who have had a relatively easier access to national resources and the impoverished - who have historically suffered economic exclusion.

Money set aside under this clause will be put into a special “equalisation fund” for a period of 20 years when it will be due for a six-year extension granted by Parliament.

“The national government shall use the equalisation fund to provide basic services to marginalised areas to the extent necessary to bring the quality of those services to the level generally enjoyed by the rest of the nation,” says the provision in the draft document prepared by the Committee of Experts (CoE).

The provision further erodes Treasury’s powers over revenue allocation leaving it in a narrow policy corridor.

At the current revenue collection target of Sh569.6 billion, the equalisation kitty would receive Sh2.8 billion, up from Sh2.7 billion in the 2008/09 financial year in which the State collected Sh546.5 billion in revenue (taxes and grants).

Kenyans have persisted in their demand for a dispersal of State resources to atone for glaring economic disparities that have been attributed to unequal sharing of the national cake.

Decentralisation is critical to the proposed constitution, whose passing will see at least 15 per cent of the total national revenue go to the 47 counties every year.

The public finance also contains clauses that will ensure balanced sharing of national revenue, limiting Treasury’s discretion as the sole body that draws up the budget.

Finance and constitutional experts supported creation of the equalisation kitty- a new addition to the Naivasha draft - but also called for adequate mechanisms to safeguard against mis-allocations.

“The problem in Kenya is that we appear to have too many funds and this creates opportunities for leakages,” said John Akoten, an economist with the Institute of Policy Analysis and Research (IPAR).

Besides the kitties created by the proposed constitution such as the Consolidated Fund, the proposed ‘county governments revenue fund’ and a new ‘contingencies’ fund, there already exists legally entrenched funds such as the women, youth, constituency development fund and the local authorities transfer funds. “All these funds should be put into one basket to minimize duplication of roles,” said Dr Akoten.

When Parliament sits to pass new laws to bring the new constitution into force, it is expected to deal with thorny issues such as overlapping statutory bodies.

Peter Wanyama, an advocate with Mohammed & Muigai law firm says the identification of “marginalised” groups may also prove controversial unless a clear formula is written into law.