Parliament slashes supplementary budget, seals Ksh.37B deficit

The Parliamentary Budget and Appropriations Committee has sealed a Ksh.37 billion hole in the first proposed supplementary budget following amendments to Treasury’s spending adjustments.

The improved deficit is largely attributable to the discounting of new development projects as members faulted the National Treasury for its introduction of projects whose funding was missing from the original approved estimates.

As such the revisions by the committee narrow the new financing gap to a projected Ksh. 55 billion from Ksh.92.1 billion through the slashing of fresh spending to Ksh.49.8 billion from the initial increase of Ksh.80.1 billion.

In its report to the National Assembly, the Kimani Ichungwa-led committee underscored the misalignment of revenues to projected economic growth even as it pointed to the inadequate disclosures on new revenue sources.

“The supplementary budget has not indicated sources of fully financing the additional expenditures as per section 40 (6) of the Public Finance Management (PFM) regulations.

Further to its displeasure, the committee expressed concern over the trim of programs beyond the recommended 10 percent threshold even as it reprimanded the Treasury for further breaches to the PFM law.

From the presented supplementary budget, the Budget committee has appraised the increase of development expenditure by Ksh.50.6 billion while trimming recurrent expenditure by Ksh.799 million.

Bounce Back

With Acting Treasury Cabinet Secretary Ukur Yatani having reigned in on Parliament’s and Judiciary budgets, the committee has reinstated the agencies allocation but for marginal cuts totaling to Ksh.1.3 billion and Ksh.83.4 million respectively.

The State department of infrastructure has meanwhile lost key allocations to infrastructural projects with the committee going after unplanned costs.

As a result, the department which falls under the wing of Transport Cabinet Secretary James Macharia is set to lose key funding to planned projects including Ksh.2.3 billion from the JKIA-James Gichuru Expressway, Ksh.3.4 billion in the allocation of access roads to food security and food nutrition facilities and Ksh.3.5 billion from the planned Textile Park in the Naivasha Special Economic Zone.

The Ministry of Health is meanwhile off the hook in its funding of the Universal Health Coverage (UHC) plan as the budget committee retains the allocation of Ksh.15.9 billion in spite of channelling the funds through counties conditional grants.

The Ksh.55 billion hole

The committee has made an attempt of realigning the mini-budget to revenue expectations but has fallen short of matching the funding of a projected Ksh.55.3 billion deficit who’s funding remains unclear.

The unmatched deficit is set to raise uncertainty to fiscal management by pointing to the scope for further borrowing.

Already the the budget committee has appraised the revision of both net external financing and domestic borrowing by Ksh.358 billion and Ksh.307 billion respectively.

Ironically, the budget committee has warned of repercussions to gaps in financing in its projection of public debt at Ksh.6.7 trillion by the end of June against a set target of Ksh.6.3 trillion.

Analysts at Genghis Capital worry Parliament may turn a blind eye on the effective budget deficit to set the stage for the re-occurrence of mini-budgets in the future.

“Our thought process ends up with the can being kicked down the road. Why fix the financing gap at the present yet there is an opportunity to rationalize the budget in the future?” They pose.

The National Assembly is expected to put the final seal of approval on the mini budget on December 5.