Treasury stripped of budget role in new anti-graft war

What you need to know:

An independent Budget Office at the Presidency will prepare budgets in collaboration with the Parliamentary Budget Office away from the Treasury.
President Uhuru Kenyatta said separating budgeting from execution would cut out unnecessary public spending on non-essential goods and services.
It will also spare taxpayers the burden of higher taxes that the Treasury has consistently introduced to finance the bloated expenditure plans.

President Uhuru Kenyatta Monday stripped the Treasury of its budget making role and ordered his chief of staff Joseph Kinyua to create an independent Budget Office at the Presidency as he renewed his fight against runaway corruption in government.

Mr Kenyatta said the budget office will prepare budgets in collaboration with the Parliamentary Budget Office away from the Treasury, which he said has been prone to influence peddling that leads to unnecessary expansion of spending plans.
“This will ensure that I drive priorities, oversight and reduce influence peddling in budgeting, while ministries and departments concentrate on implementation and service delivery,” said Mr Kenyatta.

The directive is in line with Kenya’s presidential system of government where budgeting is a key function of the Presidency while the Treasury is mainly left with the job of managing government debt.

It takes Kenya right into the US system where the Budget Office sits in the White House with its head as one of the president’s top advisers.

Mr Kenyatta said separating budgeting from execution would cut out unnecessary public spending on non-essential goods and services and spare taxpayers the burden of higher taxes that the Treasury has consistently introduced to finance the bloated expenditure plans.

Taxpayers and civil society groups have faulted the many taxes Mr Kenyatta’s Jubilee government has introduced since coming to power two and a half years ago partly to bankroll the cosy lifestyles of senior government officials at national and county levels.

Treasury secretary Henry Rotich introduced new excise duty on water, juice and beer in June to help plug deficits in his Sh2.1 trillion budget for the current fiscal year.

“To reverse the perverse incentive of government officials travelling as a way to earn money, we will introduce travel wallet cards for all State Officers and Chief Executive Officers of State Corporations,” said Mr Kenyatta.

The wallet cards, he said, will enable him monitor the benefits that the State officers’ travels bring to the country.

The Controller of Budget report, however, shows that President Kenyatta’s frequent foreign trips cost taxpayers Sh1.2 billion in the financial year ended June, adding to the national budget strain.

READ: Uhuru, Ruto lead the pack in defying Treasury as travel spend hits Sh10bn

Mr Kenyatta also directed Attorney-General Githu Muigai to fast track the passing of a new set of laws that provide for blacklisting of unscrupulous suppliers and withdrawal of operating licences for banks involved in illicit transactions.

Kenyans are also looking forward to a stable tax environment after the President announced a moratorium on tax increases and introduction of new taxes in the next financial year starting July 2016.

Any government agencies seeking to introduce a new tax or to increase an existing tax will have to first clear with Office of the President explaining the benefit of the new tax or higher charge, Mr Kenyatta said.

“I am therefore going to insist that we have no increase in the overall government tax in the next financial year,” said Mr Kenyatta.

“I direct every State agency seeking to increase its tax to demonstrate to my office the need for the change and commensurate benefits,” he said, giving the example the National Hospital Insurance Fund (NHIF) and its new rates.

He made the announcement at State House, Nairobi after a multi-sectoral meeting with senior public officials and private sector representatives who presented him with a raft of measures meant to add impetus to the fight against corruption.

Mr Kenyatta’s government has recently come under a sustained attack from the public, the opposition, civil society groups and western envoys over rising levels of corruption and apparent inertia in dealing with it.

“Today marks a new beginning,” Mr Kenyatta said in a televised briefing to the nation.

He announced that all those hoping to do business with government will have to sign a code of ethics that binds them to transparent dealings.

Companies who act in breach of the code and their directors will be disqualified from doing business with the State for at least five years.

Banks that act in breach of anti-money laundering rules will lose operating licences and their directors prosecuted as part of the effort to cut the pipeline that finances terrorism.

The President said he had held talks with Central Bank of Kenya Governor Patrick Njoroge and the head of the Financial Reporting Centre (FRC) to strengthen supervision of banks to combat money laundering.

Financial institutions are required to report any transaction above $10,000 (Sh1 million) or its equivalent in any other currency as well as any complex, unusual or suspicious transaction to the FRC.

The Proceeds of Crime and Anti-Money Laundering Act requires banks to report large volumes of money transacted and “pay attention to all unusual patterns of transactions, and to insignificant but periodic patterns of transactions which have no apparent economic or lawful purpose”.