We have run out of cash, Rotich admits
7 months ago, 8 Mar 06:02
The National Treasury yesterday admitted the government faces a serious cash crisis and cannot meet all its financial obligations. Funding to key government projects has been affected as well as county governments whose budget the government plans to slash by between Sh15 billion and Sh17 billion. “We need to discuss with you [senators] and governors that the figure which we put on the table is not feasible based on the challenges that I have explained,” Treasury CS Henry Rotich told the Senate committee on Finance and Budget. Because of the massive cash crunch, government institutions have been asked to cut down wastage and improve efficiency in the use of money allocated to them. “Every institution must tighten its belt. We have adopted a tighter fiscal framework to reduce expenditure. We have to cut expenditure across the board so that we can match with our revenue,” he said. He blamed the financial austerity on the failure by the Kenya Revenue Authority to meet targets in projected revenue collection, and the prolonged electioneering period. “We have discussed with the KRA how to catch up by tightening the tax net on the domestic and Customs revenue,” Rotich told the committee chaired by Mandera Senator Mohamed Maalim Mahamud. According to Rotich, the government is experiencing a shortfall of Sh70 billion in its revenue collection in the current financial year – 2017/2018. He said a combination of domestic and international loan repayments falling due, last year’s two presidential elections, the unstable political environment and demand for disbursements (to the counties) have led to the cash crisis. As a result of the cash crunch, it is likely that Kenyans will face tough times ahead because the government will continue to borrow locally in competition with the public, which will make it more expensive for small businesses to access credit from banks. As at December 2017, Kenya’s debt stood at Sh4.55 trillion, which has condemned the country to dedicating 54 per cent of revenue collected to repaying loans. The strict repayment terms have also seen the Treasury forced to borrow more, including the recent Eurobond, in order to repay due loans. “We want Parliament to reduce the allocation given to the counties. We want the Division of Revenue Bill amended to lower than the Sh302 billion,” Rotich told the senators. The senators, among them Mutula Kilonzo Junior (Makueni), demanded to know why the county governments are four months behind disbursements, despite the Senate developing and approving a disbursement schedule. They argued that only Sh134 billion (40 per cent) has been disbursed to the counties against the stipulated equitable share of Sh302 billion. Related: In July last year, President Uhuru Kenyatta assented to the County Allocation of Revenue Act, 2017, setting out the equitable share of the national revenue for each of the 47 counties. The counties were slated to receive Sh302 billion in equitable share of national government revenue, Sh23 billion in conditional grants and Sh16.4 billion in conditional allocations from loans and grants from development partners. ...
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