Markets & Finance

Ministries fail to spend development cash

projos

Analysts say there is need to have timelines set for the development projects in order to track their implementation. FILE

Ministries are expected to return more than 30 per cent of the funds allocated to them for development last year, despite changes meant to push up the absorption of the cash.

The recruitment of technocrats as Cabinet secretaries and the change to devolved government has failed to close the gap reported annually between allocated funds and actual spending. The result, analysts say, is that taxpayers get a distorted view of public spending priorities.

As at end of April, only 60 per cent of the Sh273 billion voted for their long term projects had been released to ministries and State departments.

With some ministries receiving less than a quarter of their budgeted allocation, the Government seems on track to leaving at least a quarter of its development funding unused. This reflects an absorption rate similar to that for the same period last year despite changes -- such as the appointment of county commissioners -- that were expected to improve supervision of projects in the devolved units.

READ: Counties fall back in development spending

“The Government ought to encourage absorption of budgeted funds if good growth is to be achieved,” said John Mutua, the Budget programme officer at the Institute of Economic Affairs.

Analyses of previous budgets show some ministries spend less than half the amounts allocated to them for development in any given year.

In 2013/2014, for example, the Infrastructure and Energy ministries only spent about one third of their allocation. Security-related spending, however, often exceeds allocations, ending at 109 per cent of the budget that year, according to an analysis conducted by the International Budget Partnership.

“It is important to look at how much is actually spent and on what,” argue Dr Jason Lakin and John Kinuthia in a brief on IBP’s website.

“Often, the initial budget is changed during the year and some sectors are better implemented than others. Kenya’s priorities, when we consider actual spending, may be different from (what may be apparent based on) the initial allocations.”

(See Infographic: How budget 2013/14 was actually spent)

Delays experienced during public procurement of goods and services have been mentioned by experts as a factor in slowing down absorption of budgeted funds.

For example, it takes up to 18 months on average for major infrastructure projects to be rolled out. This could take longer when legal road blocks are erected by losing bidders or citizens alleging irregularities.

Kippra principal policy analyst Joseph Kieyah says an inflexible procurement law is also a hindrance. “Each procurement is unique but they all have to follow one law,” he said.

Professor Kieyah said there was need to review the law so as to recognise and give clear processes for different types of procurements.

Last year the procurement guidelines were reviewed to give purchasing institutions powers to start spending on approved projects faster. The President has also been talking tough on the use of allocated funds telling Cabinet secretaries to ensure full use of development funds.

Treasury is setting up a single account for all ministries, ending the practice where each managed its funds. This is expected to prevent situations where projects are delayed awaiting funds while other State agencies are holding unused monies. Failure to use funds in time costs the taxpayer as the Government pays more interest for money lying idle with the exchequer.

Dr X.N Iraki, an economist, said there was need to have timelines set for the development projects in order to track their implementation.

“The reduction in economic growth is more than the 30 per cent of unused fund because it also affects the private sector,” said Mr Iraki. He also bemoaned the stringent procurement rules, introduced to curb corruption, saying the excessive caution affects growth.

As at April, the Education ministry had the lowest absorption rate, 20 per cent of the Sh24 billion set aside for it in the development budget. The ministry was not able to launch the laptop project which was its pet project after the tendering process was challenged in parliament and in the courts.

The Agriculture ministry had the highest absorption rate of 85 per cent driven by the implementation of the Galana Irrigation Scheme.

Transport and infrastructure, which received the largest allocation for development, Sh45 billion had used Sh27 billion with two months before the close of the financial year. The Ministry of devolution and planning had used Sh32 billion of its Sh44.5 billion development budget.

Dr Iraki suggested the government could use the carrot and stick strategy to entrench usage of the funds. Ministries that fail to absorb funds allocated are to receive a freeze while the others get incentives.

Delayed disbursement of funds budgeted for infrastructural projects from donors has also been cited as a major cause of the low execution of the development plans. As at end of April Treasury had received Sh9 billion in grants against a provision of Sh27 billion.