Queries over suspect budget allocations

National Treasury Cabinet Secretary Prof Njuguna Ndung'u. The National Treasury will splash in excess of Sh1.2 billion to refurbish Bima House and Herufi House.

The National Treasury will splash in excess of Sh1.2 billion to refurbish Bima House and Herufi House.

This is among a number of suspect allocations running into billions for recurrent expenditure items such as refurbishing offices, airtime, travel and training, even as questions linger about the integrity of Kenya’s runaway public debt.

An analysis of allocations to the Treasury over the past financial years shows annual allocations running into millions of shillings spent on water reticulation works and installation of CCTV cameras at the two buildings that host the Treasury.

In the financial year 2021/22, Treasury allocated Sh450 million for water reticulation works at the buildings and a further Sh210 million in FY 2022/23. 

The Treasury has allocated Sh100 million for the same in FY 2023/24 and a further Sh210 million projected in FY 2024/25.

A petitioner on Monday asked the National Assembly to interrogate the budgetary allocations to such individual items to establish their eligibility, saying the figures appeared inflated at a time taxpayers are burdened with taxes.

To illustrate the questionable spending priorities, fraud risk management consultant Bernard Muchere told Saturday Nation of a State Department that has so far spent Sh753 million refurbishing a building in the last three years and wants an additional Sh200 million this year.

“This amount, in my opinion, is enough to purchase a plot and construct an office. This contributes to the unrealistic budget expenditure estimates,” he said.

The amount spent is Sh225 million (2020/2021 financial year), Sh100 million (2021/2022 financial year), Sh210 million (2022/2023 financial year) and Sh200 million (2023/2024).

Mr Muchere explained that the budget shows that refurbishment will continue, and hence included in the 2023/2024 budget are expenditure estimates for the 2024/2025 financial year (Sh320 million) and Sh200 million for the 2025/2026 financial year.

“It shows that by the end of the refurbishment works, the money spent will be enough to construct another building equivalent to the one being refurbished,” Mr Muchere told Saturday Nation.

Another example is the Attorney-General’s office, which was given Sh74 million for refurbishing its buildings in FY 2022/23 and will get Sh174.8 million for the same in FY 2023/24.

In his petition to Parliament, Mr Muchere pointed to a State Department that was allocated Sh195 million for office partitioning in the financial year 2022/23.

The department has been given a further Sh100 million for FY 2023/24 for the same purpose, figures which he argued are inflated.

Recurrent expenditure

Separately, Mr Muchere illustrated to Nation the case of the Ministry of Foreign Affairs where the State Department of Foreign Affairs has been allocated Sh17.84 billion for recurrent expenditure.

This includes a budget of Sh3 billion for renting space and items. Mr Muchere argues that such annual allocation is too big and is enough to purchase the assets outright, which would save taxpayers’ money in the long term.

“Sh3 billion is enough to procure such assets to serve the department for five years before replacement. If the option of procuring outright is embraced the public would have saved about Sh12 billion in the next five years,” he added.

Foreign Affairs Principal Secretary Korir Sing’oei told Nation that the allocation is for renting residences for Kenyan missions abroad.

“This is rent for the chanceries and residences that we lease for our missions abroad. We lease about 43 chanceries, 39 ambassadors’ residences and 328 staff houses,” said the PS.

In the new budget that totals Sh3.679 trillion, the Treasury has allocated Sh1.565 trillion for national government recurrent expenditure for FY 2023/24, an increase from Sh1.387 trillion that was allocated for the current financial year.

Some Sh743.15 billion has been allocated for national government development expenditure in the new financial year, which is also a notable increase from Sh711.5 billion in the current year. 

President William Ruto’s maiden budget will be an increase of Sh295.7 billion from retired President Uhuru Kenyatta’s last budget of Sh3.384 trillion for the financial year 2023/24.

Mr Muchere has also joined a growing list of individuals that have questioned the authenticity of Kenya’s public debt figures.

Kenya’s debt hit a record Sh9.39 trillion in March and continues to exert an outsized influence on the country’s annual budget with interest on debt outstripping expenditure on development programmes.

The Treasury will pay Sh775.14 billion as interest on debt in FY 2023/24, while principal debt redemption will total Sh850.1 billion.

“Wherefore, your humble petitioners pray that the National Assembly interrogate the FY 2023/24 domestic debt repayments of Sh1.002 trillion with emphasis on the amounting to Sh628.26 billion to establish their integrity,” he said.

Public debt "exaggerated"

His sentiments echo those of Busia Senator Okiya Omtatah who this week claimed, without giving evidence, that Kenya’s public debt has been exaggerated by over Sh1 trillion.

“If you look at the (public debt) figures, Kenya has overpaid its debt by more than Sh1 trillion, we do not owe anybody anything. If you look at the figures of what we have legitimately borrowed and what the government has been paying over the years and you do a balance sheet you find that we have overpaid the debt,” he said on a local radio show.

The government has also come under pressure for spending borrowed money on recurrent expenditure such as payment of salaries and utilities in violation of the law.

Section 15(2)(C) of the Public Finance Management Act (PFM), 2012 dictates that the government should use borrowed funds only to finance development programmes.

This is to guarantee a return on investment that will enable the repayment of the debt.

In the FY 2021/22, the Treasury illegally spent Sh162.2 billion of borrowed money on recurrent expenditure in breach of the law, according to Treasury data.

The Treasury projects to collect Sh2.571 trillion tax revenue in FY 2023/24 to be reached through new tax proposals in the Finance Bill, 2023.

The tax revenue target represents a 17 per cent increase relative to the expected 2022/23 collections.

The Bill includes tough proposals, including introducing a new statutory deduction into the National Housing Development Fund at three per cent of gross earnings.

It has further proposed to raise VAT on petroleum products to 16 per cent from the current rate of 8 per cent.

The proposal is expected to have a profound effect on the cost of petroleum products in the country and would likely push up the prices above the current historical highs.