Economy

Treasury spends fuel subsidy cash without approval

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National Treasury Cabinet Secretary Ukur Yatani during the launch of Economic Survey Report 2021 on September 9, 2021. NMG PHOTO

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Summary

  • The Treasury withdrew Sh14.62 billion from the Consolidated Fund between August 20 and September 13, 2021 to meet unforeseen expenditure.
  • Out of the withdrawal, Sh3.59 billion went to development expenditure while Sh11.03 billion was spent on recurrent expenditure.

The Treasury spent Sh14.6 billion to stabilise petroleum prices, mitigate drought and conduct security operations in additional budgetary spending without the approval of Parliament.

The Treasury withdrew Sh14.62 billion from the Consolidated Fund between August 20 and September 13, 2021 to meet unforeseen expenditure that was not budgeted for in the current financial year.

Out of the withdrawal, Sh3.59 billion went to development expenditure while Sh11.03 billion was spent on recurrent expenditure.

The bulk of the recurrent budget, Sh7 billion went to fuel subsidy, Sh2.17 billion went to drought emergency and Sh2 billion for expansion of Nairobi Eastern Bypass into a dual carriageway.

A further Sh362.69 million was spent on procurement of Covid-19 vaccines, Sh200 million was utilised to settle a legal claim and Sh250 million went towards construction of Kisumu Conference Centre in preparation for the 9th Africities conference.

Security operations gobbled up an additional Sh120 million while Sh10 million went to fight female genital mitigation (FGM)

On the Development spending of Sh3.59 billion the Ministry of Defence took the lion share of Sh2.5 billion, Devolution (Sh1.2 billion), Water and Irrigation (Sh970 million) and University Education (Sh10 million).

Article 223 of the Constitution empowers the national government to spend money that has not been appropriated by Parliament if money has been withdrawn from the Contingencies Fund.

The Treasury is required to seek the approval of Parliament for any spending within two months after the first withdrawal of the money.

The Treasury is now seeking the approval of the House to regularise expenditure of Sh14,622,931,824.

The Treasury documents tabled in Parliament on Thursday shows that Sh7 billion was withdrawn from the Ministry of Petroleum budget under the Petroleum Development Levy.

The Treasury, which administers the levy on behalf of the Ministry of Petroleum, approved the withdrawal of Sh7 billion on July 15, 2021.

The law guiding the levy demands that it supports a subsidy when fuel prices rocket and infrastructure upgrades in the energy and petroleum sectors.

The levy was introduced in April and discontinued last month, sending fuel prices to the highest level in Kenya’s history.

The energy regulator — Energy and Petroleum Regulatory Authority (Epra) — removed subsidies of Sh7.10 on petrol, Sh9.90 on diesel and Sh11.36 on kerosene that applied on the prices of fuel sold in the month to October 14.

This increased the price of petrol by Sh7.58 a litre in Nairobi to Sh134.72 while diesel jumped Sh7.94 to Sh115.6 a litre — the highest in Kenya’s history.

The State had since March offered consumers of diesel and kerosene a subsidy, with those using petrol enjoying the benefit with the exception of the May review.

The subsidy scheme, supported by collecting Sh5.40 a litre from July last year, was depleted in August after the State used Sh3.8 billion to upgrade infrastructure in the energy sector and Sh18.1 billion to support standard gauge railway (SGR) operations.

COOKING GAS

The Treasury collected Sh31 billion in petroleum levy from July last year out of which Sh8.6 billion went to fuel subsidy.

Parliament will this week debate the recommendations of the Finance committee which wants a reduction of the levy from Sh5.40 per litre to Sh2.90, a cut on the Value Added Tax (VAT) from Sh8 per litre to Sh4, reduction of VAT on cooking gas from 16 percent to eight percent and margins for oil companies from the current Sh12 to Sh9.

The MPs also want the inflation adjustment on fuel waived this year and the annual adjustment to be done bi-annually starting next year.