Collapsing under Debt
The current constitution is a failure to Kenyans on public finance and debt
KENYA'S TOTAL PUBLIC DEBT AS OF NOW IS AT KSHS 1.19 TRILLION.
Kenya keeps getting into public debt without the knowledge of taxpayers who ironically have to bear the burden of repayment. We currently have a constitution that does not cater for transparency in public finance and debt which has a damning effect on our economy which we shall illustrate below. Public debt and misappropriation of funds is a major factor for the high poverty levels in Kenya creating a Government that cannot sustain growth in social amenities such as hospitals, schools and roads because it is too broke and doesn't have long-term policies to benchmark progress on.
Thus the first question we should keep at the back of our mind is, does the proposed constitution seal the loopholes in public finance?
In Kenya, the budget process occurs in three stages (i) budget planning and formulation (ii) budget approval & (iii) execution and monitoring
i) budget planning and formulation & (ii) budget approval
The budget is laid before parliament on or before 20th June of each financial year for authorization. However, there are serious weaknesses such as secrecy of budget information, violations of budget rules, and extra-budgetary expenditures. It is not transparent. In the very recent past, independent audits have exposed questionable transactions in key Kenyan government ministries including Ministry of Agriculture, Ministry of Education, Special Programmes and the Office of the Prime Minister.
(iii) execution and monitoring
The biggest independent forensic audit to investigate the National Budgets for the financial years (FY) of 2006/2007, 2007/2008 and 2008/2009, was ordered by Parliament. Sadly but not surprisingly, the audit never kicked off which may have been discovered and prevented even larger corruption scandals.
The Controller and Auditor General in the recent past expressed concerns over some external debts that are illegal charges on the Consolidated Fund. An example would be where it was alleged that the treasury illegally repaid amounts of up to Kshs 1.057 Billion shillings to Belgian (Ducroire) and Austrian (BAWAG) Banks for the phantom Ken Ren Chemical and Fertilizer Factory in 2008 without parliamentary approval. It has further been alleged that payments of guaranteed debt by the government on behalf of private institutions that have no benefit to the Kenyan people amounted to over Kshs. 28 billion in the financial year 2007/8.
Expenditure and Accountability of Public funds- The current constitution under Section 100 creates the consolidated fund giving parliament the power, but no capacity to supervise the fund's application. Currently, the classification of public expenditure fails to indicate the purpose of expenditures and focuses on the financial inputs rather than the output or expected outcome. I.e. it focuses on how much money is being spent as opposed to what is the objective of the spending. The government therefore, never considers alternative options of reaching a desired objective or service level. A good example, is when the government purchased diesel generators on borrowed money to produce electricity just before the el nino rains started, instead of focusing on creating sustainable power generation such as solar, wind and geo-thermal plants.
Borrowing by National Government - Kenyans need to be adequately informed and regularly updated on the acquisition of public debts and their consequent application on national projects. It is a known fact that all debt charges for which the Government of Kenya is liable, is charged to the Consolidated Fund with the final debt redemption lying with the tax payer.
Following the expose of the Supplementary Budget scandal over-allocation discrepancy for FY 2008-2009, the Fiscal Management Act was enacted and the 1st budget prepared under this Act was presented by the Minister for Finance on 10th June 2010 for the FY 2010/2011. The budget showed a budgetary deficit of about Kshs. 230 billion. These funds have to be raised through taxes or borrowing locally and externally which will attract sizable interest. In 2005, our public domestic debt measured 18.3% as compared to 28.4% in 2009. In the Financial Year 2009/2010, the budget deficit was Kshs. 109 billion, we still rushed to the local market and borrowed a further Kshs. 15 billion. There is a worrying trend that the Government does not appear to be committed towards reducing public debt.
There is serious need to address the issue of borrowing, making these records available and accessible to the public to monitor this debt burden. The proposed constitution tries to do so, through the provisions on public debt and finance, as well as the provisions on Freedom of Information.
It is usually the case that, executive budgets are transacted secretly which provides an ideal environment for misappropriation of public resources. The Proposed constitution in Article 211 provides that parliament will prescribe the terms on which the national government may borrow money. It gives the national assembly and the power to request the Cabinet Secretary responsible for Finance to present information concerning any loan or guarantee taken by Government, including the total amount of debt, what the funds are being used for, how the government intends to repay that debt and how much has been paid so far.
The creation of the Budget and Revenue Commission (BRC) under the proposed constitution will strengthen accountability and reduce theft or misuse of public resources for the benefit of a few regions at the expense of the rest of the country.
In conclusion, the proposed constitution provides for a better budgetary process which provides for accountability of the public fund. The adoption of the proposed constitution will give Kenya a historical opportunity to end the Treasury's monopoly of discretion over the National Budget and make the process more participatory, consultative, transparent and accountable.
