Parastatals squeezed in spending directive to boost Uhuru plan

The government has frozen capital expenditure of all parastatals and capped their recurrent expenditure to what they spent last year in a move that is set to hit hard state corporations that are gobbling up billions of taxpayers’ money.

Through a circular dated July 23, Head of Public Service Joseph Kinyua has asked state corporations to seek written permission from the National Treasury before spending any money, even for the ongoing projects.

'TENDERPRENEURS'

They will also not be allowed to put any money into the new development projects lined up this year, until a review of their individual budgets is done.

Though Mr Kinyua says the directive is to help free up resources for the Big Four Agenda, it is going to have a ripple effect on spending plans of parastatals as well as help close the taps of corruption that ‘tenderpreneurs’ have been exploiting.

Mr Kinyua says in the directive that the government is currently aligning the budget for the financial year 2019/2020 with the Big Four Agenda.

“In furtherance of the same, the Cabinet has directed that all State Corporations and Semi-Autonomous Agencies (SAGA), are only allowed to spend an amount equivalent to one quarter of last year’s approved recurrent budget,” Mr Kinyua says.

“This amount should support all priority expenses over the first quarter ending September 30, 2019,” the letter adds. This means that parastatals can now only pay salaries and other incidentals necessary to keep their offices running and nothing more.

Mr Kinyua also said the government had issued a moratorium placing in abeyance all capital expenditures until otherwise directed.

“During the moratorium period, no capital expenditure is to be undertaken unless the particular expenditure item is an ongoing project and is specifically approved in writing by the National Treasury,” Mr Kinyua writes.

Acting Treasury CS Ukur Yattani did not pick our calls on the issue and had not responded to text messages from the Sunday Nation by the time of going to press. But he is understood to be still receiving briefings on the what is going on at the Treasury.

Mr Kinyua’s letter is addressed to all chairpersons and chief executive officers of state corporations. It is copied to the Attorney-General, all Cabinet secretaries, principal secretaries, the Auditor-General and the Central Bank governor, among others.

BIG FOUR

During the period, the government will do a further review and rationalisation of the individual state corporation budgets by a team established by the National Treasury, comprising officials from respective line ministries and the presidency.

“Consequently, all State corporations and SAGAs are required to submit to the director general, public investment and portfolio management, National Treasury, as per the attached template by July 31, 2019,” Mr Kinyua writes.

He has asked the board of directors of the parastatals to enforce the full compliance of the directive.

In the Sh3.02 trillion budget, the Jubilee government plans to sink a total of Sh450.9 billion in projects under its Big Four Agenda.

From this, about Sh76.7 billion will go towards projects the Jubilee administration calls the drivers, while the remaining Sh374.1 billion will be pumped into enablers of the Big Four projects.

“The targeted expenditures will prioritise employment creation, youth empowerment, supporting manufacturing activities, enhancing health coverage, improving food security and enhancing living conditions through affordable housing,” Treasury says in the budget documents.

It notes that the allocations to other critical sectors such as education, infrastructure, energy and social protection will remain protected to achieve the targeted objectives.

Parastatals are becoming the weakest link in the fight against corruption, with a number already fighting various scams.

DEFAULTERS

The Kerio Valley Development Authority (KVDA) is the most recent parastatal to be rocked by the Sh63 billion scandal that brought down Treasury chief Henry Rotich and his principal secretary Dr Kamau Thugge among 26 other state officers. Dam construction will cost the taxpayer another Sh25.1 billion this year, despite having got nothing from the billions spent in previous dam projects.

Other parastatals and state agencies caught up in various scandals include Kenya Power, Kenya Pipeline Company and the National Youth Service (NYS).

They are also struggling to break even, with a number surviving through state support.

Last year, the government wrote off Sh27.2 billion lent to state parastatals on life support, among them Kenya Airways and a number of agencies in the agricultural sector.

This year, the taxpayer is staring at losing another Sh116 billion advanced to 29 state corporations, which have defaulted and show no indication that they will be able to pay.

The Athi Water Services Board is the biggest defaulter on the list of shame, having Sh39.1 billion in non-performing loans.

The government had advanced it a total of Sh39.5 billion by June 30, 2018.

Also on the list of defaulters is Lake Victoria South Water Services Board (Sh13.1 billion), Coast Water Service Board (12.2 billion) and Tanathi Water Services Board (9.7 billion).

The Local Government Loans Authority comes seventh on the list of entities unable to service their debt, with Sh7.5 billion. The entity went into default more than five years ago and is not making any attempts at paying the money it owes to the national government.

2019/20 BUDGET

Also on the list of government agencies heavily indebted is the Lake Victoria North Water Services Board and Tana Water Services Board at Sh7.5 billion each.

Taxpayers are also staring at losing the Sh1.1billion lent to Agro-chemical & Food Company Limited ((ACFC), which was established in 1978 to produce power alcohol from sugar cane molasses.

This comes at a time when the national government is at war with the counties over revenue sharing. President Uhuru Kenyatta on Thursday said he will not give counties a penny more since the government has limited resources and urged them to use what they have.

The new budget read recently shows a government that is spending faster than it is able to generate. This has left it with a big budget hole that it has to fill by borrowing.

The budget deficit will grow this year to Sh607.8 billion from Sh559 billion in the last financial year.

The second biggest cost in the 2019/20 budget is repayment of debts and devolution.

In the budget, Treasury plans to spend a total of Sh551 billion in interest payments for loans and pension. This is Sh61 billion more than the Sh490 billion this year.

Salaries and wages alone will take Sh470 billion in the new budget, an increase from the Sh 425 billion the government is spending in the current financial year.