Key projects frozen as debt cost hits budget

The Treasury has put a number of flagship projects on hold as money spent on servicing public debt overtakes the entire recurrent expenditure amid below-target revenues.

The expenditure figures for the first quarter of the 201516 shows that critical sectors have not received a single cent three months to September for development projects as the Treasury released Sh132.6 billion for public debt repayments.

This comes amid a cash crunch that has stalled payment of essential services like rural electrification and free primary education in a crisis that has also been blamed on low revenue collection and high borrowing costs.

Not a single cent has been released to kick-start development projects in the internal security, science and technology as well as job-creating industries like fisheries, tourism and mining.

Eight independent commissions, including the Parliamentary Service Commission, Teachers Service Commission and Ethics and Anti-Corruption Commission —which had planned to acquire a new office block —have not received project funding.

At Sh132.6 billion, the debt repayment is more than the Sh117 billion recurrent spending and nearly six times the Sh24.5 billion spent on projects in the quarter to September.

“The low exchequer issues is a clear indication that absorption rate for development expenditure at the end of the financial year might be low and set targets might not be met,” Parliamentary  Budget Office (BPO) warns.

READ: Treasury struggles to meet loan obligations

Project spending is critical to creating infrastructure and putting money in private hands through demand for raw materials that ultimately create new jobs.

The Controller of Budget has also raised the alarm over Kenya’s growing debts, which increased by a fifth to Sh2.84 trillion in June, up from Sh2.36 trillion in the similar month in 2014.

“Increasing public borrowing may result in undesirable fiscal consequences such as high interest rates, inflation and overburdening future generations,” Agnes Odhiambo, the Controller of Budget said in a budget review report last week.

Data from the Central Bank of Kenya shows the Treasury has overdrawn Sh43.2 billion, against a limit of Sh46.8 billion, giving it little room to manoeuvre in raising quick cash such as that needed to pay for salaries and allowances as well as maturing debt