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Treasury to ditch manual system of payment to funds recipients

National Treasury building in Nairobi. FILE PHOTO | NMG
National Treasury building in Nairobi. FILE PHOTO | NMG 

Kenya plans to reform the public finance management to enable automated payment of funds from the Treasury to the spending units and abandon the current manual system.

The manual system has led to frequent accumulation of pending (unpaid) bills as counties, ministries, departments and agencies (MDA) spend cash before they have it in their accounts, said the International Monetary Fund (IMF) in its update on consultations with the Kenyan government.

County governments for instance have for long complained of late release of funds from the Treasury, with some incurring debts from commercial banks in a bid to sustain operations while still awaiting release of money from the national government.

“The authorities will implement further public finance management [PFM] reforms to strengthen expenditure controls and increase transparency. These will include automation of the release of funds through the exchequer account to prevent the accumulation of pending bills,” said the IMF.

The multilateral lender also reported that the central government also intends to centralise expenditure controls including clarification of fiscal rules and standardisation of project appraisal and selection.

Initially the move to send cash automatically to spending units had been expected to be completed last year, but this did not happen, leading to new commitments in the latest consultations between the central government and the multilateral creditor.

The IMF noted that the MDAs were still making payment requests electronically, but the Treasury still transferred cash to their accounts manually. Digital signatures are required to enable the implementation of the commitment and the IMF noted that legal issues surrounding the acceptability or validity of the signatures are yet to be sorted out.

“ Legal issues remain regarding the validity of digital signatures,” said the IMF.