Parliament’s economic advisory team has poked holes in Treasury Cabinet Secretary Ukur Yatani’s mini-budget, citing failure to meet critical health needs.
The Parliamentary Budget Office says the Supplementary Estimates II have not catered for Covid-19 emergencies as much. It says there is little information provided with regard to financial measures in place to mitigate Covid-19 apart from cash transfers to vulnerable groups.
The PBO observed that a bulk of the increments cater for the shortfall in salaries on account of job evaluation and CBA agreements, as well as for settling pending bills.
The team is concerned that referral hospitals and Kemri have been allocated little or no additional resources yet are in the frontline of the fight.
An immediate impact was manifested on Tuesday when the Kenya Medical Research Institute said it could not raise Sh790 million to replenish its stock of virus testing kits.
PBO says the facilities are overstretched and may require additional budgetary support in the next two months. It also challenged Yatani’s allocation of Sh2.6 billion from external funding towards targeted testing of 100,000 persons.
“This means that the Health ministry has minimal funding - both recurrent and development, from the government own resources.
“Given the magnitude of this pandemic, this allocation seems inadequate given the leading role this sector is playing in response to this situation,” the report reads.
PBO also poked holes in the significant reduction of external funding support towards TB, Malaria, UHC as well as UHC complementary funding.
“This is an indication that the development partners have withheld full financial year funding for the various interventions,” they warned.
PBO was established in 2007 as a unit under the Directorate of Information and Research Services.
In the Supplementary Estimates II, MPs increased recurrent spending to Sh31 billion while development was reduced by Sh83 billion.
PBO warns that additional pending bills may arise from the significant reduction in development cash.
The adjustments saw Treasury raise Sh40 billion which it has not only allocated to the Health ministry but also for other interventions.
About Sh10 billion would go to cash transfers, Sh10 billion in tax refunds, Sh13 billion for pending bills and the rest for direct health interventions.
In its 71.4 per cent compliance rating for the estimates, PBO observed that some programmes’ reallocation exceeded the 10 per cent threshold.
Section 43 of the Public Finance Management Act, 2012 outlaws adjustments above the stated threshold, unless approved by Parliament.
PBO further disapproved the introduction of new programmes contrary to the regulations against the move. It cited the Nairobi Metropolitan Services.
“It is imperative to note that the PFM Act of 2012 prohibits introducing new programmes at the supplementary stage.”
“Further under development expenditure, the proposed allocation of Sh1.5 billion to the programme does not indicate the projects it will deliver,” the PBO said.
This was the same case of allocation of Sh1.041 billion to road projects that had no allocation in the approved budget for 2019-20.
Allocations to the Lands ministry also exceeded the threshold with the economists arguing it would be a challenge to absorb the additional Sh917.4 million.
In their analysis of the Supplementary Estimates II, the experts said the significant reduction of budget poses an adverse impact on development projects.
“It will likely lead to pending bills especially with regard to ongoing projects. This is despite recent government efforts to settle all pending bills,” the report reads.
The team further criticised Yatani for not giving evidence that the reductions have affected projects that will have the least impact if delayed.
PBO also queried the lack of an updated fiscal framework spelling policy choices, revenue projections, and expenditure.
“Without an updated macro framework, it is difficult to determine the veracity of the projected fiscal deficit, net domestic borrowing and fiscal projections.”
The economists also decried the policy shift from the Big Four agenda citing substantial deductions of resources allocated to the projects.
PBO cited the removal of the Housing Fund seed capital. “There is a need for the Housing department to explain how it will deliver this ambitious agenda.”
It also questioned the transfer of the leasing of police vehicles back to the Treasury yet MPs resolved that it be domiciled in the Interior ministry.
The economists also poured cold water on whether the Crops department will absorb the Sh10 billion to boost Strategic Food Reserves in two months.
“Additional information should be provided to justify the expenditure,” PBO cited, further questioning why UHC targets have remained unchanged after the Sh1.8 billion cut.
“They have not been revised to reflect the reduction even though it is quite significant. This makes the budget less credible.”
The Budget watchdog has also queried the meagre allocations to the manufacturing sector. PBO says industries should have been given subsidies.
The team said there should be more interventions to support the services sector – transport and hospitality, which have been hard hit by the pandemic.
The service sector contributed approximately 3 percentage points to the 5.6 per cent economic growth registered in 2019, PBO notes.
“As such, such a significant decline in the performance of the service sector will lead to a great loss in GDP growth,” the team said.
MPs debating the appropriations urged that the benefits that directly go to Kenyans be prioritised.
Edited by R.Wamochie