Kenya’s rebased economy will not grow as fast as initially projected, a paper tabled by Treasury Secretary Henry Rotich shows.

Instead of the 5.8 per cent growth rate on which the national budget was based, Treasury now expects the economy to grow by between 5.0 per cent and 5.5 per cent.

This drop will impact revenue the government expects to raise as well as spending allocations for various sectors; the Treasury generally relies on growth assumptions to set the revenue it expects to raise for government spending.

In a memorandum to the Cabinet in September, Rotich expressed concern about the weak economic performance in the first quarter of the year, which he blamed on poor rains and the impact of insecurity on the tourism sector.

The Budget Review and Outlook Paper (BROP) will be submitted to Parliament on Cabinet approval. The paper has three objectives.

One is to inform Parliament how government spent public money in the previous year, including whether the targeted revenue approved was raised and expenditures made as promised.

Budget implementation

Two, it will inform Parliament how the implementation of the last budget and today’s economic landscape are affecting the implementation of the current budget and makes the case for revisions in the Supplementary Estimates.

Lastly, it sets spending limits for the various sectors and ministries to be considered by the planners of the 2015/16 budget.

In the paper, Mr Rotich has asked the Cabinet to direct relevant bodies to respect the proposed limits to ensure that projects included in the budget are have the lowest cost but the greatest impact.

Rotich’s memorandum also seeks approval for a raft of new measures meant to generate greater tax revenue, cut wasteful spending and require ministries and counties to implement, at the very least, 80 per cent of their budgets.

Among measures likely to be adopted before the next budget is implemented are tax reforms.

Rotich is seeking the complete automation of KRA’s services and the introduction of two new tax bills to Parliament to strengthen tax administration.

Duplicated roles

Once biometric registration of civil servants is complete, the government intends to eliminate duplicated roles and redundancies to free cash to be spent on other essential services.

Ministries, departments and agencies as well as county governments have shown poor absorption rates of their allocated budgets.

Counties, for example, only used 58 per cent of their allocation; most of it was spent on wages. Only 21 per cent was reported spent on development, which goes against government policy that at least 30 per cent or revenue should be spent on development.

“There will be enforcement of a project implementation performance benchmark of at least 80 per cent, expenditure tracking and a value-for-money audit,” Mr Rotich notes in the paper.

Lastly, the CS intends to implement a government payment gateway and the use of the IFMIS (Integrated Financial Management Information System) as the sole end-to-end platform used by government for its financial operations.

The BROP indicates the government missed its target on both revenue and expenditures and identifies those responsible for the under-performance.

While the Kenya Revenue Authority raised its targeted Sh917 billion, ministries, departments and agencies that were supposed to come up with appropriations-in-aid of Sh63 billion booked only Sh28 billion.

Under-spending

The difference is attributed to under-reporting by ministries, especially Education, under which universities fall.

Government ministry under-spending by Sh150 billion has been attributed to the lack of capacity, procurement issues and delays.

The ministries of Education and Health, as well as the Teacher’s Service Commission, gobbled up 42 per cent of recurrent expenditure.

The Defence and National Coordination ministries took another 27 per cent.

Transport and Infrastructure was the biggest spender of development funds, followed by Energy and Petroleum, and Devolution and Planning. Nonetheless, money spent on development projects at the county level was not captured in the review.

While noting that this year’s economic performance has been weak, Treasury projects much higher growth from 2016 upwards of 6.3 per cent.

Higher budget

It identifies irrigated farming, geothermal power, affordable house loans and ICT among the drivers of this growth, with the petroleum sector contributing to growth further down the line.

Rotich in his memorandum warns that poor budget execution means the base for the next budget is reduced.

The next budget is expected to be Sh1.67 trillion, up from the Sh1.59 trillion allocated in the current budget, with government revenues expected to Sh1.35 trillion.

Recurrent expenditure will rise to Sh914 billion while development expenditure will rise to Sh505 billion.

The deficit of Sh250 billion will be financed through borrowing Sh114 billion (external) Sh133 billion (internal). There is no mention of privatisation of government entities.