Puzzle of extra Sh600 billion in Yatani budget angers legislators

The puzzle of an extra Sh600 billion in the 2021/22 budget has outraged members of the National Assembly, who have accused the Treasury of ignoring House resolutions while preparing financial estimates.

The 2021 Budget Policy Statement (BPS) passed in the National Assembly in March this year has the state’s overall expenditure ceiling of up to Sh3.02 trillion for the 2021/22 financial year.

However, the printed estimates tabled in the House last Thursday vary expenditure plans to Sh3.6 trillion, with MPs querying the huge variance they see as an Executive scheme to spend more than initially disclosed to Parliament.

Given that the BPS should form the basis for finalising the budget, MPs with expertise in financial matters — John Mbadi (Suba South), Dr Makali Mulu (Kitui Central) and Kimani Ichung’wah (Kikuyu) — say the variation is abnormal.

Mr Mbadi and Dr Mulu are members of the Budget and Appropriations Committee, whose report on the 2021 BPS was adopted by the House in March.

Mr Ichung’wah was the chairman of the committee that scrutinised the 2020 BPS and estimates for the current financial year before he was removed for political reasons.

Yesterday, Mr Mbadi told Nation that the huge variation is a matter that the National Assembly will have to deal with to restore the credibility of the budget-making process.

“It will be the first time the variation is so huge. Treasury has always failed to reflect the resolutions of the House on the BPS. This is bad manners. As a House we will not allow this,” said Mr Mbadi, who is also the Leader of Minority.

Revenue target

Kieni MP Kanini Kega, who chairs the Budget Committee did not respond to our inquiries.

The 2021 BPS as approved by MPs projects Kenya Revenue Authority (KRA) to collect Sh2.03 trillion in revenue for the 2021/22 financial year with ordinary revenue target being Sh1.78 trillion.

The document further caps the Executive’s spending at Sh1.31 trillion in recurrent and Sh658.94 billion for development.

The expenditure ceiling for the Parliamentary Service Commission (PSC) is Sh37.88 billion and Sh17.92 billion for the Judiciary.

The Equalisation Fund has Sh6.83 billion with the county governments allocated Sh409.88 billion. Out of the county governments’ allocations, Sh370 billion is in equitable share, while Sh39.9 billion is in conditional allocations, which the court ruled should not be part of the shareable revenue as reflected in the Division of Revenue Act 2021.

This means that the national government has to craft a legal framework to have the funds disbursed to the counties through the CRF.

“The expenditure ceilings for the 2021/2022 budget shall be binding and the National Treasury should prepare the budget estimates within these binding constraints,” the BAC report on the BPS that was adopted by the House, reads.

This means that the BPS shall form the basis of the 2021/22 financial year budget.

However, it appears this is not the route that Treasury wants to take. Increasing the budget means ballooning the Sh930 in fiscal deficit as contained in the approved BPS.

While passing the BPS, the House warned that any increase of the fiscal deficit beyond what has been approved in the BPS for the 2021/22 financial year will not be approved by Parliament.

To plug the budget deficit, Sh530 billion is to be sourced from the domestic market and Sh399.9 billion as foreign financing.

“You had projected to spend Sh3.02 trillion, but two months down the line, you’ve overshot the projections by Sh600 billion. So what has changed?” Mr Mbadi posed.

Dr Mulu said the Treasury move is against the Public Finance Management (PFM) Act and the House resolutions on the 2021 BPS.

Section 25 (8) of the PFM Act provides that the Cabinet Secretary in charge of the National Treasury shall take into account resolutions passed by Parliament in finalising the budget for the relevant financial year.

“This is a clear pointer to an unstable budgeting framework by the National Treasury. Otherwise, how do you explain passing BPS in March and within two months you increase the total ceiling by Sh600 billion?” Dr Mulu posed.

“It shows a lack of budget credibility and poor assessment of budget macroeconomic fundamentals,” the Kitui Central MP added.

Mr Ichung’wah noted that the National Treasury has made a habit of rubbishing the BPS as adopted by parliament.

“This is a clear pointer to the non-existence of a tangible budgetary plan by the National Treasury with a well thought out expenditure framework and fiscal discipline,” said Mr Ichung’wah.