Home Business Treasury eyes Sh152bn from projects shake-up

Treasury eyes Sh152bn from projects shake-up


Economy

Treasury eyes Sh152bn from projects shake-up


yatani

Treasury Cabinet Secretary Ukur Yatani. FILE PHOTO | NMG

BDgeneric_logo

Summary

  • The Treasury is targeting Sh152.35 billion in cash savings from cancellations of about a third of stalled public projects.
  • Treasury Cabinet Secretary Ukur Yatani said a comprehensive nationwide audit of State projects had been completed, paving the way for a shake-up of cash-gobbling ventures in the wake of the Covid-19 pandemic.

The Treasury is targeting Sh152.35 billion in cash savings from cancellations of about a third of stalled public projects.

Treasury Cabinet Secretary Ukur Yatani said a comprehensive nationwide audit of State projects had been completed, paving the way for a shake-up of cash-gobbling ventures in the wake of the Covid-19 pandemic.

“This contributes to fiscal consolidation attainment as rationalisation/cancellation of even a third of the stalled projects could yield up to 1.5 percent of the GDP in fiscal savings,” Mr Yatani said in his newly published 2021 Budget Policy Statement(BPS).

Treasury data shows the country’s nominal GDP as at June 2020 stood at Sh10.157 trillion –meaning that the 1.5 percent fiscal saving targeted by the State through cancellation or restructure of stalled projects would translate to Sh152.35 billion.

“The Covid-19 crisis presents an opportunity to reprogramme and rationalise the stalled stock of projects and enhance compliance with PIM (Public Investment Management) Guidelines appraisal process for the new projects,” Mr Yatani said.

Treasury Principal Secretary Julius Muia said accounting officers in each ministry will verify the status of the projects before the data is analysed for action. He did not reveal the number and projects targeted for shelving.

“We completed the stocktaking exercise for all national government projects. We have sent the data to all the accounting officers for verification and sign-off. Thereafter, we will proceed with data analysis,” he said.

According to a recent World Bank review of Kenya public expenditure, the country has 3,972 ongoing projects many of which are significantly delayed, incomplete or stalled.

The bank said that 522 projects worth Sh1.1 trillion are dormant and are increasing funding pressures and pilling up pending bills.

“Dormant projects with very low completion rates and high outstanding costs may be considered for rationalisation provided that a requisite assessment of contract, legal and financial implications is undertaken,” the World Bank said.

The bank, however, warned that cancelling the projects would not come cheaply as contractors are likely to sue the government and claim damages.

It said that 40 percent of the projects became white elephants during the transition to devolution, with 195 irrigation projects initiated in the second term of retired President Mwai Kibaki not being allocated funds by county governments.

About 53 projects are dormant for various reasons, including litigation, wayleave challenges, acquisition of land, and funding suspension by the donor.

Another reason for stalling projects has been imposition of budget ceilings by the Treasury which is keen on taming expenditure.

The Northern corridor, Kenya’s strategic transit route with a mix of rail, road, pipeline, ports, and inland waterways, makes up 72 percent of the value of dormant projects, 22 requiring Sh798 billion to get to completion.

Water, irrigation, and environment sectors have the highest number of dormant projects totalling 216, whose cost is equivalent to Sh26.7 billion.

These sectors are followed by the security sector with 99 stalled projects, and the infrastructure with 89 projects.

The huge number of stalled projects, which come with delayed payments to contractors, is a major contributor to the cash crunch in the private sector that has precipitated job losses and reduced cash in people’s pockets

The pending bills issue in the national and county governments remains a major concern in the economy.

As at September 2020, the total pending bills by ministries, departments and agencies (MDAs) stood at Sh346.2 billion, having risen from Sh334.2 billion in June, Treasury data shows. Parastatals accounted for Sh284 billion of the unpaid bills while ministries had Sh61.7 billion, up from Sh48.3 billion in June.

Counties, for their part, had as at the end of the 2019/20 fiscal year accumulated Sh113.85 billion pending bills—both historical and current, which was equivalent to 27.5 percent of their total revenues.

A report by the Controller of Budget (CoB) indicates that as at November 10, 2020, the counties had settled Sh39.07 billion —an equivalent of 76.2 per cent of the eligible pending bills — leaving an outstanding balance of Sh12.22 billion.



Source link