Rotich tightens grip on spending to tame runaway debt

The National Treasury has formally imposed tighter controls on planned government programmes, pushing through yet another critical piece of action needed to reduce spending and restore stability in the country's public finances.

In a circular sent to ministries, departments and agencies (MDAs), the Treasury says any new proposals submitted through sector working groups (SWGs) that decide on budget priorities must focus on President Uhuru Kenyatta's “Big Four” agenda and completion of ongoing projects.

“The government recently directed that no new projects should be started without the approval of the National Treasury. The SWGs are therefore advised to only consider new projects approved by the National Treasury [with] … priority to “Big Four” interventions and completion of ongoing projects,” Treasury secretary Henry Rotich says in the circular.

The embargo is intended to ensure greater spending control that is required to bring down the fiscal deficit currently standing at just over seven per cent and reduce the heavy debt burden that has rabidly grown in the past five years.

Mr Rotich says the total expenditure for the fiscal year starting July 2019 will drop to 23.2 per cent of the gross domestic product compared to 26.3 per cent in the current financial year ending in June 2019.

“The government is pursuing a fiscal consolidation policy that is aimed at reducing the overall fiscal deficit and debt accumulation," the CS says, adding that the expected outcome is a reduction of overall expenditure and net lending from 26.3 per cent in fiscal year 2018/19 to an average of 23.2 per cent in the medium term.

And in move that is likely to tame any quest by government agencies to ask for more money from the National Treasury, Mr Rotich says the MDAs will only be allowed to bid for allocation of resources if they have completed programme performance reviews (PPR) for the three-year period ending June 2018.

“Accounting officers should note that their respective MDAs will only be allowed to bid for resources in their respective sectors after the finalisation of the PPRs. MDAs will be required to present PPR reports prior to discussing the funding requirement with the Resource Allocation Panel,” the circular says.

The circular demands that the MDAs conduct a detailed assessment of the progress made towards achieving the initial objectives, including analysis of previous budgetary allocations, actual expenditure and achieved outputs.

Kenya's budgeting and spending plans have recently come under heavy criticism for carrying along the huge number of incomplete projects as well as planned projects that never got off the ground because the requisite donor funding was never released over the failure to produce reports on previous spending.

“PPR reports should indicate both financial and non-financial indicators of performance for each programme," Mr Rotich says, adding that the report should provide progress of both domestically and externally financed projects within a programme,” said Mr Rotich.

Kenya is currently under immense pressure to cut its total annual spending in order to reduce the fiscal deficit to 5.7 per cent by the end of June next year and to 3 per cent by June 2021.

The International Monetary Fund last week put a foreign exchange support facility on hold because its was unable to confirm that Kenya had carried out the reforms envisaged under the programme formulated and agreed in 2016.

Key provisions of the programme, which expired last Friday, is fiscal consolidation – a byword for austerity – and widening of the tax base, a condition seen as having set in motion the recent price increases arising from imposition of valued added tax and excise duties on goods and services that were previously exempted.