State agencies fail to spend budget billions as year closes
Ministries and agencies had only spent a total of Sh510.5 billion or 44 per cent of their allocations by the end of nine months of this financial year underscoring the problems in budget absorption.
eKey government departments failed to spend the billions of shillings allocated to them in the national budget leaving the economy without the financing steam to power growth.
The Office of the Controller of Budget (OCoB) says billions of development budget funds are lying idle with the exchequer as the quantity and quality of public services declines and the pace of economic growth remains subdued for the second year in a row.
The budget execution report says state agencies had spent only one third of the development funds by the end of March pointing to the likelihood that less than half of the money will have been used by the close of the year.
The report, the second to be published by the Controller of Budget since the office was established late last year, says state agencies had nine months into the financial year spent only 66 per cent of recurrent expenditure funds, about 10 percentage points below the target pointing to the fact that the challenge of spending cuts across the entire government machinery.
Only Sh510.5 billion or 44 per cent of the total annual development and recurrent expenditure funds had been spent nine months into the financial year — against the target 75 per cent.
Agnes Odhiambo, the Controller of Budget, says an acute shortage of human resources and lack of expenditure monitoring structures has left most government departments without the means to spend the budget billions with serious consequences on the pace of economic activity.
The Ethics and Anti-Corruption Commission (EACC) topped the list of government ministries and agencies that had spent the least amounts of the development money by the end of March.
The agency, which has been without top executives since the removal of lawyer PLO Lumumba late last year, had spent less than seven per cent of the money it was allocated for development – pointing to the planning and approvals paralysis arising from the absence of the top managers.
Other poor spenders were the Cabinet Office, and three ministries including East African Community, Labour as well as the Justice and Constitutional Affairs.
These agencies had used less than eight per cent of the funds at their disposal only three months to the close of the financial year in June.
The ministry of local government topped the list of departments that lacked the capacity to utilise recurrent expenditure funds – followed by the Ministry of Planning and the Public Service Commission.
Mrs Odhiambo says understaffing and slow recruitment processes in the public service have weakened the capacity of most ministries and state agencies to spend recurrent budget funds – pressing the case for employment of a large number of civil servants in the next financial year.
That Kenya, a country where the rate of unemployment is estimated at 40 per cent of the adult population, is suffering acute staffing crisis in key government departments speaks volumes of the efficiency of the public service commission – the body that is charged with the hiring of public servants.
Government’s spying machinery, the National Security Intelligence (NSI) topped the list of big spenders with an absorption rate of 80.6 per cent.
The agency, whose mandate includes espionage and counter-intelligence, is expected to be particularly busy in the coming months as Kenya prepares to hold its first general election since the January 2008 chaos.
The budget execution report has particularly left a grim picture of the rising inability by government departments to use allocated funds – including the billions of shillings set aside each year for infrastructure development.
Economists say this inability to spend money (especially development funds) partly explains the sluggish rate at which the economy is growing.
Infrastructure development, including the building of roads, telecommunications networks, ports, railways and airports, received more than half of the current year’s Sh360 billion development budget funds but the report shows that only 38 per cent of the money had been used by the end of the ninth month of the financial year.
Decline in economic activity
Kenya’s economy is expected to grow at between 3.5 and 4.5 per cent this year, according to Planning minister Wycliffe Oparanya.
This decline in the pace of economic activity has been attributed to delayed and excess rainfall besides the raging euro zone crisis but the Controller of Budget’s report has now added poor use of budget money to the list.
Public service executives and heads of state agencies say elaborate procurement procedures are to blame for the slow pace at which development money is being spent.
The OCoB says this failure to effectively and efficiently use funds is at the centre of the government’s inability to deliver goods and services that must be immediately addressed to put the economy on a firm growth path.
“The Office of the Controller of Budget has noted from the expenditure analysis that some of the MDAs (ministries, departments and agencies) have only partially absorbed the resources available to them, a major concern as this non-utilisation of resources results in non-provision of goods and services to the public,” says the report.
Kenya’s private sector players said inability of state agencies to spend allocated funds, especially on infrastructure and the social sector, is increasing the cost of doing business in the country with serious consequences on long term growth.
“When you do not spend money meant for infrastructure, it means that you keep the cost of commuting to work high. When you do not spend on health, someone else has to provide it and this comes as additional cost for individuals and business – that only generates pressure for higher wages to meet the rising cost of living,” said Patrick Obath, chairman of the Kenya Private Sector Alliance.
Mr Obath blames the lengthy contracting procedures in government for the slow pace at which budget money is being spent.
The private sector’s view and the OCoB’s finding that the procurement difficulties are at the centre of the poor government spending are expected to add impetus to recent calls for repeal of public procurement regulations.
The challenge of spending is expected to escalate in the next financial years with the advent of county government.
The CoB says the government must act with speed in establishing the Transitional Authority – the body that is charged with setting up county governments – and build local capacity to avoid a looming expenditure paralysis.
