Parliamentary Budget Office report warns of decline in Kenya's growth rate

The country failed to realise an estimated Sh81 billion wealth as a result of failure by the county governments to spend all funds allocated for development projects.

According to a report by the Parliamentary Budget Office (PBO), the country’s Gross Domestic Product (GDP) in the last financial year (2013/2014) registered 1.7 per cent deficit owing to the low absorption capacities of the county governments.

This translates to Sh80.87 billion in economic activity that was lost due to failure by counties to absorb all funds, according to PBO.

In their latest monthly Bulletin (October), the legislators also warned that the growth of the economy is likely to shrink this year (2014) with strong indications that absorption of development funds by ministries, departments and government agencies (MDAs) is also likely to be low in the current fiscal year.

The performance of the economy is often measured in terms of the growth of GDP — the value of all goods and services produced in a country in a year.

According to the report, a total of Sh494.9 billion (30.9 per cent) of the 2014/2015 national budget was allocated for development expenditure.

But according to the exchequer releases, from July to October 2014 the MDAs received Sh53.6 billion for development, representing 17 per cent of the net estimates of Sh320.9 billion. However, only Sh48.46 billion (19 per cent of net estimates) was spent during the year under review. “This indicates that absorption of development funds at the end of this financial year is likely to be lower.

This will eventually lead to a decline in GDP growth,” indicated the PBO report.

Development budget

According to the report, initial development budget for counties was targeted at Sh100.4 billion in the financial year 2013/2014, but only Sh36.6 billion was actually spent.

This comes in the wake of reports by the Controller of Budget that counties are slashing development budgets and using the money for payment of salaries, purchase of motor vehicles, domestic and foreign travels and sitting allowance payments for Members of County Assemblies.

According to the County Governments Annual Budget Implementation Review report for the 2013/2014 fiscal year, the absorption of funds by the devolved units increased during the period, but the increased usage of funds was mainly on recurrent activities, thereby stifling implementation of development projects at the grassroots level.

The National Treasury has recently taken issue with the county governments, saying the devolved units must prepare quality budget plans.

“In executing the budget function, we must adhere to fiscal discipline and ensure that available resources are used efficiently and effectively for the intended purposes,” said Cabinet Secretary Henry Rotich.