Red-tape blamed for delay in release of Sh17bn stimulus

The economic stimulus package will not be fully disbursed this financial year, a development which casts doubt on the government’s plan to kick-start the economy through targeted funding.

The Sh22 billion emergency fund which was supposed to have filtered down to critical sectors of the economy by June this year, has had serious setbacks with red-tape within ministries cited as a key impediment to their timely disbursement.

So far, only Sh4.5 billion out of the planned Sh22 billion in stimulus funds have been released.

While admitting that the government had been slow in disbursing the stimulus funds, Prime Minister Raila Odinga moved to assure MPs that the remaining Sh17.3 billion would be pushed to the next financial year’s budget.

“It appears we will have to roll over this programme into the next financial year for it to have the desired effect,” said Mr. Odinga.

The botched plan to release the funds places the state between a rock and a hard place.

The government now has address the delicate issue of economic recovery while seeking a silver bullet to solve growing unemployment and proceed with infrastructural initiatives which were highly dependent on the stimulus package.

Although good rainfall and a rise in positive business sentiments looks set to accelerate economic growth this year, the delayed stimulus package may stall key government projects and slow the pace of growth.

The emergency cash tailored around labour intensive projects was targeted at reviving economic growth which took a downturn in 2008 following a prolonged drought, electoral violence, a rally in oil and food prices and spill-over effects of the global economic crisis.

Roads, railways, ports, energy and high-speed Internet which is expected to take off this year with the arrival of submarine fibre-optic cables, will take Sh140 billion.

Kenya has been racing to improve its infrastructure to make up for decades of neglect which left the roads and railway networks in tatters.

The business community has continuously complained that the poor shape of the country’s infrastructure was hindering their operations, increasing their costs and turning off foreign investors.

This year, however, the huge development spending is geared at stimulating consumer spending through the transfer of government money into people’s pockets to get them spending again and boost growth.

But critical for the government, will be the creation of jobs for the growing number of Kenya’s unemployed youth.

“The main challenge for the government will be employment creation,” said Peter Wachira, senior investment manager at AIG Investments.

The government’s rapid youth job creation plan dubbed ‘Kazi Kwa Vijana now looks in doubt as the governments seeks a solution to the get the stimulus funds flowing again.

The project seeks to create some 350,000 menial jobs in a bid to reduce the growing unemployment rate among the youth.

The package also included Sh20 million to each constituency for construction and equipping of a health centres; Sh30 million for construction of one secondary school as a centre of excellence per constituency and Sh10 million for each constituency for construction of fresh produce and wholesale markets.

In addition, Sh2.5 million was allocated to each constituency for the construction of jua kali sheds and a further Sh1 million for each constituency to equip the sheds to boost youth employment.

There has been concern that a large fraction of development projects identified under the programme have failed to take off in the current financial year.

In the rich countries, governments have unveiled multi-billion dollars stimulus packages including huge infrastructure spending, increased assistance to the unemployed and ease borrowing requirements in the effort to spur the sagging demand in their economies.