By PETER LEFTIE pmutibo@ke.nationmedia.com AND JAINDI KISERO jkisero@ke.nationmedia.com ( email the author)
Posted Monday, February 4 2013 at 00:30
Posted Monday, February 4 2013 at 00:30
In Summary
- There are fears that the country is inching closer to a financial crunch as it seeks funds to finance next month’s elections, with revelations the UN is holding back Sh18 billion ($209.3 million) in reimbursements following the Somalia incursion — money Nairobi had budgeted for the polls
- Well-informed sources have told the Nation that the African Union Mission in Somalia (Amisom) has demanded a forensic audit on Kenya’s reimbursable claims on costs it incurred in the war in Somalia since the incursion in October 2011
- The gap in the government’s finances has ballooned to unprecedented levels, estimated at slightly over Sh130 billion — equivalent to more than 10 per cent of the Sh1.2 trillion budget approved by Parliament in June
The electoral commission faces a shortfall of Sh6 billion to fund a presidential run-off if there is no outright winner in the first round.
Independent Electoral and Boundaries Commission (IEBC) chief executive James Oswago confirmed on Sunday that the polls agency would require the extra amount to fund the run-off if none of the eight presidential candidates failed to garner the required 50 plus one per cent of the total votes cast in addition to 25 per cent of the votes cast in at least 24 counties on March 4.
“We have all the funds required for the main election and we are ready. The only shortfall we have is about Sh6 billion to fund a presidential run-off if it comes to that,” said Mr Oswago.
He, however, allayed fears that the shortfall could jeopardise the polls, saying the government would draw the funds from the Consolidated Fund.
“Sh6 billion is money the government will easily obtain from the Consolidated Fund so there should be no fears whatsoever that the elections may stall,” he stated.
Mr Oswago spoke in the wake of fears that the country is inching closer to a financial crunch as it seeks funds to finance next month’s elections, with revelations the UN is holding back Sh18 billion ($209.3 million) in reimbursements following the Somalia incursion — money Nairobi had budgeted for the polls.
Initially, IEBC had a budget of Sh17 billion ($197.6 million) for the General Election. However, since Parliament approved IEBC’s budget in June, its budget has had to be enhanced to cater for acquisition of biometric voter registration machines through a Sh6.6 billion ($76.7 million) loan. Clearly, the arithmetic is not adding up for Kenya.
Well-informed sources have told the Nation that the African Union Mission in Somalia (Amisom) has demanded a forensic audit on Kenya’s reimbursable claims on costs it incurred in the war in Somalia since the incursion in October 2011.
Budget hole
Kenya is going to the polls with a huge hole in its budget. The budget for the current financial year was planned on the assumption that the government would receive the Sh18 billion from Amisom.
Under an arrangement approved by the UN Security Council, Amisom was to reimburse Kenya expenses it incurred on personnel and equipment when the country deployed forces in the war in Somalia last year.
The gap in the government’s finances has ballooned to unprecedented levels, estimated at slightly over Sh130 billion — equivalent to more than 10 per cent of the Sh1.2 trillion budget approved by Parliament in June.
Even with the gap having reached worrisome levels, new fears have emerged that the negative fiscal position may further worsen with reports that the Treasury has been slapped with even bigger additional spending requests by security agencies.
In addition, the country must grapple with having to fund a completely new system of devolved government with 47 counties.
Kenya is the only country in East Africa with a modestly developed domestic credit market to borrow from.
But local borrowing is not much of an option now because the government has almost surpassed its borrowing target for this financial year.
The Kenya Revenue Authority said mid-January it had collected Sh380 billion in taxes in the first half of the current fiscal year which ends in June — a figure which is Sh34 billion short for the period’s target and less than half of Sh881.2 billion KRA aims to collect by June.
The shortfall was a result of a decline in revenues in all the major tax divisions, including value added tax, domestic excise duty, trade taxes and petroleum taxes.
The increased pressure to meet tax collection targets has pushed KRA to adopt such innovative strategies as setting up new units to catch tax evaders and slapping businesses with new taxes.
The Treasury insiders warned that were Finance Minister Njeru Githae to bow to the new pressures by security agencies for more money, the government would go into the elections with a fiscal gap whose negative consequences will start showing in the macro-economy almost immediately.
The timing of the new pressure for money on the Treasury by security agencies is also raising eyebrows.
In the past, it had been observed that outgoing ministers and permanent secretaries tended to make last-minute spending decisions — pushing through questionable payments to lock in gains — especially in the period when Parliament is not sitting.
What is clear is that the government is right now in no position to accept new expenditure requests. Several indicators point to the parlous state of Kenya’s finances.
In the first place, revenues are below what the government had projected at the beginning of the financial year by a massive Sh43 billion.
Second, the government has had to incur additional expenditures within the financial year, including salary awards to teachers, lecturers, health workers and police, amounting to Sh30 billion.
Combined with expenditure on security operations in Somalia, implementation of the Constitution, the additional expenditures, which have arisen since the beginning of the financial year, come to Sh100 billion.
Part of this story was first published in this week’s The East African
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