Treasury under fire for holding back Sh218 billion for ministries

National Treasury FCPA Benard Ndungu, Director General Accounting Services and Quality Assurance, when he appeared before the Committee on Trade, Industry and Cooperatives at Continental House in Nairobi on September 03, 2024 [Boniface Okendo, Standard]

The National Treasury finds itself in a tight corner, accused by Parliament of sabotaging critical development projects aimed at accelerating economic growth in the 2023/2024 financial year.

It was revealed that a total of Sh218.5 billion was not disbursed to Ministries, Departments, and Agencies (MDAs) due to a shortfall in revenue collection and financing during the year under review.

Appearing before the National Assembly Committee on Trade, Industry, and Cooperatives, officials from the National Treasury disclosed that the Sh218.5 billion includes Sh10.4 billion from the development budget intended for transfer to five State Departments, which were expected to spur economic growth.

National Treasury Director General in charge of Accounting Services, Benard Ndungu, was questioned over the ministry's failure to release the funds to the State Departments of Industry, Investment Promotion, Trade, Cooperatives, and Micro, Small, and Medium Enterprises (MSMEs).

He appeared before the House committee alongside the Director of Budget, Francis Anyona, and the Director of Planning-Macro and Fiscal Affairs, John Anjera.

Committee chair James Gakuya sought clarification on the fate of the projects, given that the country had transitioned into a new financial year amidst ongoing monetary constraints.

“The committee's biggest concern is that it appears Treasury has decided to undermine industrialisation by starving the Coffee sector and County Aggregation Industrial Parks (CAIPs) of funding. If we do not allocate resources where they are needed to generate revenue and jobs, what are we doing as a country?” posed Gakuya.

The House committee also accused the Treasury of discrediting President William Ruto's administration by failing to release Sh3 billion for the construction of six Export Promotion Zones (EPZ) flagship projects across the country. Each was allocated Sh500 million in the last financial year's budget.

Surprisingly, a report tabled by the Treasury indicated that by the end of the financial year, only a paltry Sh300 million had been allocated for the construction of the EPZs, which were among Ruto’s flagship projects.

It also emerged Treasury had not disbursed Sh3.5 billion towards the Cherry Fund, despite Parliament allocating Sh4 billion for the same in the 2023/2024 budget.

The officials were further questioned over the failure to allocate Sh350 million for the modernisation of the new Kenya Planters Cooperative Union (KPCU) warehouses, which are vital for coffee sector reforms. The funds had been allocated by MPs through the Supplementary Budget 2023/24.

Additionally, Treasury faced criticism for funding shortfalls in the State Department for Industry, including a Sh148 million shortfall for personnel emoluments, a Sh56.7 million shortfall for the Anti-Counterfeit Authority (ACA), and a Sh47.1 million shortfall at Rivatex.

Treasury was also in trouble for failing to disburse funds to the State Department for Investment Promotion for the Kenya Economic Transformation (KJET) project, a World Bank-funded initiative aimed at supporting green MSMEs and improving the investment climate in Kenya.

The Gakuya-led committee demanded to know why the funding for KJET was not included in the 2023/24 budget estimates.

Vihiga Woman Representative Beatrice Adagala accused Treasury of deliberately starving Semi-Autonomous Government Agencies (SAGAs) of funds, seemingly to suffocate some of them.

This prompted Committee Vice Chairperson Maryanne Keitany to press the officials on why only 29 per cent of their approved development budget was disbursed to the five State Departments, despite Parliament approving their annual allocations in full.

“You are making the President look like a liar. You are also making us (MPs) look like liars by not delivering on projects that we promised our constituents. You are responsible for generating revenue projections, so I do not understand why you did not fund these projects, even though they were included in the budget and their funds approved by Parliament,” said Keitany.

Ndungu, in his defence, attributed the closure of the financial year with Sh218.5 billion in outstanding exchequer requests to a shortfall in revenue collection and financing.

“Due to the shortfall in revenue and scarcity of cash resources, the National Treasury typically applies an administrative criterion, prioritising public debt, security, salaries, counties, social programmes such as education and health, development, flagship projects, and others,” said Ndungu.

Anyona attributed the revenue shortfalls to occurrences such as floods, drought, and the depreciation of the Kenyan Shilling against the US dollar in the last financial year. He also mentioned that tax expenditures affected revenue mobilisation.

Anjera added: “Revenue administration lapses, such as tax collection shortfalls by the Kenya Revenue Authority (KRA), also contributed to the revenue challenges.”

He further informed the House committee that Treasury is implementing measures such as reviewing tax expenditures to eliminate some from the law and collaborating with KRA to enhance administration through the incorporation of technology.

“Our biggest challenge is the size of the cake versus the numerous needs. We have to be very realistic with our finances going forward. Living within our means should be the key focus,” he added.