Development project funding as a share of the State’s total expenditure has dropped to a single digit for the first time in more than a decade, data shows, reflecting the impact of the rising cost of servicing debts.
Official data by the National Treasury shows that State ministries, departments, and agencies (MDAs) spent Sh315.06 billion on development projects, excluding the portion from donors, against a total expenditure of Sh3.44 trillion for the year ended June 2024.
This is equivalent to 9.15 percent of total spending for the national government, the first time it has sunk into single-digit territory in more than a decade based on data publicly available.
Analysis of disbursements from the Exchequer, government’s main account, shows the share of cash wired to capital projects has been falling for five straight years through June 2024.
Economists say reduced spending on development projects such as roads, water, power plants, housing, and electricity transmission lines slows down economic activities, hurting the creation of new job opportunities and government revenue, largely taxes.
Cement makers, steel manufacturers, contractors, and the thousands of workers employed in the infrastructure pipeline benefit from public spending and usually feel the pinch of a drop in public expenditure on development.
Development projects have been the main casualties of budget cuts as successive governments seek to realign expenditure through supplementary budgets to cater for programmes that were not approved amid the perennial shortfall in revenue estimates.
The budget for development projects has, for instance, been slashed by Sh122.4 billion after deadly youth-led, anti-government demonstrations and protests prompted the Ruto administration to drop new and higher tax plans for the current financial year.
The Budget and Appropriations Committee of the National Assembly has, however, said the cuts would affect projects funded by taxpayers while excluding those funded by development partners whose share in the budget for the current year is estimated at slightly more than Sh240 billion.
Cutting budgets for projects co-funded by development partners such as the World Bank Group and the African Development Bank usually affects implementation as the financiers have clauses that largely require that they release their share after the government releases its portion.
“The committee noted that the reduction in development expenditure has been consistent over the last three years. Indeed, development expenditure as a share of GDP reduced from an annual average of 6.3 percent between 2010 and 2020 to 3.2 percent in the financial year 2024/25 revised estimates,” the Parliamentary budget team said in a report tabled in the House on July 23.
“The Sh122.4 billion expected reduction in development expenditure is targeted at projects financed through the exchequer. The committee noted that this is a departure from previous years, where fiscal consolidation mainly amounted to the postponement of donor-financed development projects,” it added.
This came in a year when debt servicing costs accounted for Sh1.596 trillion, or nearly half (46.39 percent), of the total expenditure compared with a quarter (25.45 percent) or Sh435.72 billion in 2017.
The cost of debt repayments has become the single largest expenditure, underscoring the impact of commercial loans contracted in the last decade to put up much-needed roads, bridges, power plants and a modern railway line.
Funding for roads through the exchequer has been among the hardest hit.
The Treasury data shows disbursements from the government’s main account to road projects have fallen by nearly two-thirds (65.85 percent) in four years to Sh40.58 billion in the fiscal year ended June 2024 from Sh118.84 billion for the one that ended in June 2020.
Road and energy infrastructure arguably gobbled up the lion’s share of the budget under former President Kenyatta’s administration, but this came with the burden of a debt load on taxpayers, largely through loans contracted from China.
That attracted criticism from Dr Ruto’s top supporters in the run-up to the closely contested August 2022 presidential polls, with the current Chief Cabinet Secretary, Musalia Mudavadi, reportedly declaring that “Kenyans don’t eat roads”.
Mr Kenyatta said in his last address during national celebrations that his administration had built more than 11,000 kilometres of tarmac roads since taking power in April 2013, claiming the additional network was nearly six times the number of kilometres put up by his three predecessors since independence.
“The naysayers said that we should not invest so heavily in infrastructure because people don’t eat roads and floating bridges,” Mr Kenyatta said on June 1, 2022. “I refused their pessimism because I know what a new road means to the farmer who has for decades been unable to get their produce quickly to the market.”
