The Health ministry and Department of Social Protection gobbled up nearly two-thirds of the development expenditure in April after the Treasury cancelled funding to low-priority projects as it mobilised cash to fight the spread of the global coronavirus pandemic.
Disbursement to capital projects in the first full month Kenya went into partial trade lockdowns and travel restrictions fell to the lowest level since the Jubilee administration took power in mid-2013, according to Exchequer statistics published by the Treasury.
Some Sh14.17 billion was channelled into projects undertaken by State ministries, departments and agencies (MDAs) in April, a drop of Sh7.21 billion from a month earlier and Sh3.95 billion a year ago.
Development expenditure by the Health ministry, which was racing to put in place infrastructure to contain the spread of the contagious virus, amounted to Sh5.62 billion or 38.6 percent of the total development spend.
Funding of projects by the ministry from the Exchequer started rising in February when it was tasked to equip the 120-bed Covid-19 isolation centre at Nairobi county-run Mbagathi Hospital, a unit which was initially set to be a maternity wing.
Afya House’s project expenditure bumped up from Sh2.26 billion in January to Sh4.84 billion in February, Sh4.57 billion in March, and touching the highest pole in April since the onset of devolution that transferred most healthcare services to the counties.
The Social Protection Department, tasked with affairs of the elderly and other vulnerable groups in the society, was on the other hand, given Sh3.997 billion or more than a quarter of the total capital funds disbursement in April.
The elderly are seen as the most vulnerable in the fight against the global pandemic partly due to their low body immunity, with President Uhuru Kenyatta directing public servants aged 58 and above to take leave from work stations.
The State has also said that it is sending the poor in some of the slums in Nairobi cash through their mobile phones (the handouts fall under recurrent expenditure).
The Health ministry, which is in charge of protocols for stemming the spread of the virus and its alleviating attendant shocks, has in recent months been under sharp public scrutiny over expenditure of cash it has received to fight the global Covid-19 pandemic from taxpayers and donors.
Health secretary Mutahi Kagwe in May transferred up to 30 officials largely procurement, accounting and supply chain managers in what he termed part of the process to dismantle cartels at the ministry, opening up a legal battle with a few of the redeployed managers.
“This (Afya House) building here has got its fair share of criminals. Like any other market, there are a few mad cases in here, and we will unearth them,” Mr Kagwe pledged on May 27.
Amid reduction in tax receipts to Sh120.1 billion from Sh140.41 billion in the same month last year, the biggest receivers of capital cash such as the Infrastructure department and Energy ministry did not get allocation during the month.
Overall business deals dipped to 34.8 in April from 37.5 a month earlier, 49.0 in February and 49.7 in the first month of the year, according to a closely watched monthly survey based on feedback from corporate managers in key sectors of the economy.
Readings below 50.0 in the Stanbic Bank Kenya’s Purchasing Managers Index (PMI), a measure of monthly private sector activity, signal contraction in business conditions.
April’s PMI reading was just shy of the record low of 34.4 reported in October 2017, a month when the country underwent a tense historic repeat presidential poll which was boycotted by the opposition.
The downturn eased slightly in May, coming in at 36.7 after austerities such as pay cuts helped ease corporate operating costs for the first time in more than five years.
Depressed private sector deals usually cut corporate profit and hurt job opportunities, resulting in reduced corporation and payroll tax payments — which form more than half of government revenue sources — the main government revenue.
“Business conditions have contracted for five consecutive months now. In fact, the employment sub-index fell by the sharpest level in May since data collection began.
“Consequently, the reduction in the workforce has cut overall input prices for private sector firms,” Jibran Qureishi, the immediate former Stanbic Bank’s regional economist for global markets and now the bank’s chief researcher for Africa, said in the PMI statement early June.
“Furthermore, due to weak domestic demand conditions, firms have looked to reduce overall output prices too.”
Kenya has, however, since April gotten approvals for loans upwards of Sh215.24 billion from multilateral development lenders whose facilities come with low interest rates and generous payment terms.
The loans, which are aimed at bridging budget deficit and supporting socio-economic programmes to alleviate the Covid-19 pandemic shocks, helped replace the Sh200 billion that the Treasury had earlier budgeted to tap from commercial lenders — syndicated loans and Eurobonds.
The inflows comprises $1 billion from the World Bank Group, $739 million from International Monetary Fund, African Development Bank (€188 million) and European Union (€ 65 million).
The Treasury in April also raised its domestic debt rollover goal to Sh222.58 billion from initial Sh122.58 billion, giving investors the option to extend the tenure of maturing securities amounting to about Sh100 billion.
This happened after the international financial markets shut the door on emerging economies such as Kenya because of elevated risks amid uncertainties around global coronavirus pandemic shocks.
“The (Kenyan) authorities should undertake independent audits of samples of crisis mitigation spending and publish the results of these audits,” the IMF wrote on April 30 in the report that followed approval of Sh78.64 billion for Kenya.
“They should publish documentation on related procurement contracts on the government’s website, together with ex-post validation of delivery along with the name of awarded companies and the name of their beneficial owners.”