Time for a holistic dialogue on how government spends money
- The government needs to fix its spending problem, starting from how the funds are allocated and how efficiently they are deployed.
- An extensive investigation of the expenditure items that constitute the recurrent budget should, ideally, give a comprehensive perspective of why the government is unable to cut back on its bloated spending.
Parliament’s support for the controversial value added tax on petroleum products has opened a window of opportunity for a holistic, in-depth examination of how the national and county governments spend the public funds they are allocated for recurrent and development expenditure.
Higher taxes cannot be a viable solution where funds raised from taxes, loans and grants are being spent recklessly and stolen with impunity.
Essentially, the fuel VAT, which President Uhuru Kenyatta halved to eight percent when he rejected Parliament’s move to suspend for two years the initial rate proposed in the Finance Bill, only offers a temporary reprieve to the government’s chronic financial crisis.
The government needs to fix its spending problem, starting from how the funds are allocated and how efficiently they are deployed.
The greatest point of contention is why it continues to raise more money when it cannot even spend what it has put on the table.
Last month, the National Treasury reported that ministries and government agencies failed to spend Sh218.5 billion during the last fiscal year.
The explanation is that the capacity for the government to absorb the allocation is less than optimal. Procurement issues, particularly with programmes funded by external development agencies, also cause delays in project implementation and disbursement of funds.
Another concern is why the government has failed to resolve the systemic massive recurrent expenditure that crowds out the space for development spending.
In the current fiscal year, for instance, the government proposes a recurrent expenditure of Sh1.5 trillion, according to the Budget.
This means that more than 90 percent of the expected Sh1.6 trillion tax revenue would be spent by the national and county governments on salaries, operations and maintenance.
The size of recurrent expenditure, at 15 percent of the national economy or gross domestic product, is worrying, particularly compared to the spend on development, which has been allocated only Sh568 billion, or 5.7 percent of GDP.
More distressing is how fast the recurrent budget is driving the government deeper into debt to fund development.
The huge financing gap of Sh595.5 billion, between the estimated revenues of Sh1.8 trillion from taxes and appropriations in aid and the projected expenditure of over Sh2.46 trillion, is expected to be funded by foreign and domestic debt.
An extensive investigation of the expenditure items that constitute the recurrent budget should, ideally, give a comprehensive perspective of why the government is unable to cut back on its bloated spending.
Anecdotal evidence points to lots of funds being spent on unnecessary domestic and foreign trips — including “benchmarking” missions, office hospitality, entertainment, committee allowances and endless workshops.
Presumably, such perks have turned public office into a gravy train. Little wonder there’s a strikingly increased interest in government jobs in recent years, even from private sector executives who leave highly paying jobs in great haste for the much lower pay.
The other major problems in government are wasteful spending and corruption.
While numerous cases of fraud and abuse of office have been exposed, there’s less focus on wastage — which includes spending on the same items, such as purchase of equipment, every year, even though the items supposed to be replaced are in good condition.
This could also apply to works done in one year being repeated in subsequent years.
The issue is whether such activities are repeated every year, or the funds associated with these expenditures are siphoned out of the system through paper transactions — more like the fictitious Goldenberg transactions of the early 1990s.
This is the hard reality that the government should confront. As the crackdown on corruption continues, there should be a more intense assessment of the public expenditure system to weed out wastefulness and inefficiencies.
The long-term goal should be to reduce recurrent expenditure and increase public funding for development, driven by the ‘Big Four’ agenda for economic transformation — boosting manufacturing, enhancing food security, ensuring universal healthcare and providing affordable housing.
Mr Warutere is a director of Mashariki Communications Ltd. [email protected]