Bring public spending under tighter control

There is disquiet in some quarters that the cash crunch in government could point an economy in trouble following reports that the Treasury has been unable to meet some of its financial obligations and is facing a debt crisis.

Treasury has delayed disbursing money to counties, the Higher Education Loans Board and several State corporations, stoking fears that the State is running on empty. Of greater concern though is that Treasury has asked counties to use overdrafts from commercial banks to pay staff and service their day-to-day operations, raising the prospects that interest rates could further rise and shrink the appetite of businesses to borrow from banks.

It is now emerging that the State spent about half of the taxman’s first quarter collections to settle debts and pensions. Kenya Revenue Authority had collected Sh269.7 billion, of which Sh132 billion (49.1 per cent) went to paying the debts that the country owes local and international creditors.

This is unfolding at a time the red flag has been raised over the growing public debt. It has now become manifestly clear that the Government is living above its means — the Government has more bills to pay than the revenue it has. The fact that KRA collected about Sh12 billion less than its target in the July to September quarter underscores this.

There are major learnings from the events of recent weeks,therefore, there must a more concerted effort to cut down on the profligate spending we have seen. Sleaze in state offices and wastage of public funds must be brought under tighter control even as the Jubilee government considers cutting down on expenditure in the capital projects it has laid out in its overly ambitious manifesto.

We must take cognizance of the fact that the economy is overheating even before the massive infrastructure projects — the Lamu Port Southern Sudan-Ethiopia Transport (LAPSSET) Corridor, Turkana oil pipeline installation and the latter part of the Standard Gauge Railway project — come on stream.