Devolution secretary Anne Waiguru and Treasury secretary Henry Rotich during a budget forum in Nairobi last week. PHOTO | EVANS HABIL
The Treasury borrowed Sh60 billion more than originally planned in the financial year ended June, showing the extent to which the State fell short of cash to meet the annual Budget.
The government borrowed Sh251.1 billion instead of the Sh190.8 billion that had been programmed — thereby exceeding the Budget by nearly a third. The spending represented an increase of 24.5 per cent from the previous financial year.
“Net domestic financing amounted to a net borrowing of Sh251.1 billion in the period ending June 30, 2015, compared to net borrowing of Sh201.7 billion in a similar period ending June 30, 2014,” said the Treasury in a new update on the implementation of the 2014-15 Budget and the economy.
In the financial year 2015/16, the Treasury plans to borrow Sh229.7 billion, which is 21.4 per cent lower than that of the fiscal year that ended in June.
However, uncertainty remains as to whether the Treasury can stick to the target given the slow pace at which cash is being disbursed by foreign donors and possible shortfalls in tax receipts.
Out of the Sh66.4 billion expected in terms of grants from donors in 2014-15, more than half or Sh38.3 billion was actually never disbursed.
Total disbursements by external financiers — including appropriations-in-aid or cash given directly to ministries or department and used there — stood at Sh296.9 billion by June against a target of Sh343.1 billion. This meant that the external financing fell short of expectation by Sh46.2 billion or 13.5 per cent.
Early this year, the Institute of Economic Affairs drew attention to the huge discrepancies between budgeted foreign cash and what is actually disbursed, saying that it could not be relied on for the purposes of the State’s annual expenditure.
Reasons for non-disbursement include failure by the Treasury to release its contribution (also called counterpart funding) for co-sponsored projects and also the government being slow in meeting conditions set by donors.
“We had no choice but to continue borrowing domestically after revenues fell short of target. The other alternative was to cut expenditure, which would affect economic growth negatively,” said Nihil Hira, a partner at tax and financial advisory firm Deloitte Consulting East Africa.
Mr Hira said tax revenues themselves did not achieve what was expected, making domestic borrowing the inevitable alternative.
Borrowing both domestically and externally has continued to increase the total public debt, which is now estimated at Sh2.8 trillion with Sh1.4 billion being domestic debt while the rest is from foreign donors.
According to Treasury data, the debt rose from Sh2.7 trillion in April to Sh2.8 trillion in June.
Treasury fiscal, budget and economic affairs director-general Geoffrey Mwau said last week that public debt now stands at 51.5 per cent of the gross domestic product.
However, he added, the Treasury would endeavour to cut the debt to 45 per cent of the GDP in the next few years by controlling the annual fiscal deficit in a progressive fashion.
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