State to complete Sh4 trillion stalled projects in four years

njuguna

Cabinet Secretary for National Treasury and Economic Planning Prof Njuguna Ndung'u. FILE PHOTO | DENNIS ONSONGO | NMG

The State could take more than four years to complete ongoing public projects and others that have stalled, all of which will cost more than Sh4 trillion to complete.

This will place the Treasury under immense pressure as competing priorities, mainly public debt service, crowd out spending for development activities in government even as it handles a pipeline of projects currently estimated to cost Sh8.1 trillion.

The government had by last June spent more than Sh3.9 trillion on the projects in nine sectors, with the estimated balance to fully complete all the projects launched before June 2023 put at Sh4.18 trillion, a Parliamentary Budget Office (PBO) report shows.

“Presently, the government is overseeing more than 4,500 projects at various stages of development, with some of the earliest initiatives dating back to pre-2010. To successfully complete these ongoing projects, the government estimates a financial requirement that exceeds Sh4.2 trillion,” said the PBO.

The report shows that by last June, the energy, ICT and infrastructure sectors accounted for the highest spending on public projects at Sh1.64 trillion, followed by the public administration and international relations sector, where the government had already invested Sh1.2 trillion in projects that are still incomplete.

The State also spent Sh347 billion and Sh313 billion on ongoing projects in the water and agriculture sectors, respectively.

Among the ongoing projects across different sectors, those under the energy, ICT and infrastructure sectors require the highest amount of resources to complete at Sh1.68 trillion while incomplete projects in the water sector require Sh901 billion.

Projects within the public administration sector require Sh723 billion to complete and those within the health sector require Sh377 billion, the report shows. “Despite their significance in realising Vision 2030, the execution of many of these projects has resulted in financial constraints, capacity limitations, and inadequate institutional structure.

These challenges have resulted in significant outstanding bills, and in some cases, projects stalling and subsequently delaying returns on such investments,” said the PBO report.

The high costs ahead for the government to fully finance the more than 4,500 public projects (excluding new projects that could be launched), however, are in the context of struggling government revenues and growing spending pressures as the economy remains slow, while public debt service pressures strain tax revenues.

In the six months ending December 2023, for instance, spending on development activities by the national government was Sh197.4 billion, which was just a quarter of the annual target spending of Sh738 billion, after the development spending was reduced from Sh783 billion budgeted in June last year.

Treasury projects that spending on development projects over the four years to June 2027 will be Sh3.9 trillion, which could fall lower, at least judging by the performance in the current financial year which has been affected by poor revenues.

In the 2024 Budget Policy Statement (BPS), the Treasury projects to spend Sh738 billion on development, then spend Sh904 billion in the financial year ending June 2025, Sh1.09 trillion in the year ending June 2026 and Sh1.2 trillion in the year ending June 2027.

This means that should the government decide to only implement development projects that had been launched before June 2023, this will go beyond June 2027.

This is assuming the government's development spending will not be lowered since full development spending will be Sh3.9 trillion against outstanding costs of Sh4.1 trillion.

“Given the conundrum facing the implementation of these projects, the development of Public Investment Management (PIM) regulations in Kenya has come at a time, and there is a need for effective and transparent management of public resources,” the PBO states.

The Treasury, in the 2024 BPS, insists that in order to increase the efficiency and effectiveness of public spending, the government will continue to implement Public Investment Management Regulations that aim to streamline initiation, execution and delivery of public investment projects.

“Ministries shall be required to finalize ongoing projects before commencing new projects in order to reduce the government’s exposure on stalled projects,” Treasury said.

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