Finish old projects before budgeting for new ones, county and national govts told

Parliament’s experts on budget and economic policy have asked the national and county governments to concentrate on finishing ongoing development projects before new ones are started.

In its report to MPs ahead of the processing of the Budget, the Parliamentary Budget Office has asked MPs to request project appraisals before a project is selected for inclusion in the allocation for the next financial year.

The Parliamentary Budget Office (PBO) employs fiscal analysts and advises the Budget and Appropriations Committee on the Budget and Bills with a potential impact on the country’s finances.

In the absence of the Budget Committee, it has been reporting to the Liaison Committee and the departmental committees.

It says that while the allocation to development grew 29 times between 2002 and 2015, the rate of completion has been very low.

“It is estimated that as of June 2015, there were more than 1,000 projects which were classified as ongoing. The estimated cost to complete these projects is … Sh3 trillion,” the PBO says.

SH3 TRILLION

Given that most projects in Kenya overshoot their budgets, these estimated 1,000 will definitely cost more than Sh3 trillion, the PBO concludes.

In its sample of road projects started, there were several stunning examples.

For instance, the Thogoto-Gikambura-Mutarakwa road was started in October 2011 and was supposed to be completed in October 2013. In June 2015, it was only 12 per cent complete.

The Maga-Kemaru-Ambuku road was started in March 2013 and was supposed to be completed by March 2015. By June 2015, only 28 per cent had been completed.

In 1996, the government introduced the Public Investment Programme, which was meant to help planners assess how the projects were progressing.

It was, however, abandoned, resulting in the current situation where different government agencies are competing for scarce resources, meaning there are more than 1,000 projects going on at the same time and none of these is getting finished.

PROPER GUIDELINES

“There must be proper guidelines that filter and screen projects for inclusion in the Budget. The decision makers at both the Executive and the Legislature must demand … project appraisals before a project is selected for inclusion in the Budget,” said the PBO.

Both levels of government are expected to increase their spending on infrastructure a year to the election, the experts predict, as the people in charge go out of their way to impress voters.

MPs and other elected representatives would also place more emphasis on roads and other forms of visible and more tangible developments in their spheres of influence.

The experts have also proposed that counties focus on finishing ongoing projects and new programmes that would increase the wealth of the county.

They also need to allocate more money to basic social services as devolution is intended to bring services closer to the people.

To increase the completion rates, the Budget Office recommends the creation of a process to help in identifying and selecting projects for funding.

“In addition, the allocation for all projects must be guided by the principle of creating assets. Indeed, all assets created must be able to yield assets positively,” it reported.

The PBO says that while there has been an increase in expenditure on development projects, there has not been an increase in the assets.

This is because the large number of projects means there is more competition for scarce resources, sometimes the priority projects are not properly identified and there is weak management and monitoring.

The PBO also predicts that there will be a Sh93.7 billion shortfall in revenue collection in the current financial year.

REVENUE OVERESTIMATED

This will mostly be because the Treasury overestimated and committed errors in its forecast for revenue from the various sources.

The PBO foresees income tax proceeds to exceed Sh600 billion and Value Added Tax Sh294 billion.

Excise Tax, which now falls under a new regime, will yield Sh126 billion and import duty Sh82 billion.

Excise tax was previously managed under the East African Customs Management Act (EACMA), but the separation was deemed necessary because the EACMA covers the customs taxes in the East African region while the Excise Tax is for goods within Kenya’s borders.

While it was traditionally a “sin tax” charged on luxury goods, it has roped in imported vehicles, motorcycles, water and juice, yielding Sh25 billion in extra revenue.

Other taxes would yield Sh84 billion and Appropriations-In-Aid, the money paid directly for services, will yield Sh79 billion.