State in the red over debt, cash flow crisis

The government has been hit by a cash flow crisis that is threatening to paralyse services in some departments.

President Uhuru Kenyatta, during his tour of Kisii on Wednesday, told striking nurses to resume work as the “country has no money to pay”.

He urged public servants to bear with the economic situation as all money cannot be channelled to salaries.

The Star has established that a number of state projects have stalled because of a cash crunch. This is despite the expanded revenue sources—the latest being the eight per cent fuel tax.

State projects, which were approved and partially funded, have stalled for lack of Sh290 billion to complete them.

MPs are crying foul because of delays in the disbursement of CDF cash—four months to the end of the financial year.

The 290 constituencies are yet to receive Sh26.6 billion. Lawmakers have accused the National Treasury of giving empty promises.

Uhuru’s administration is also faced with the headache of sourcing Sh2 trillion to fund the Big Four before 2022.

In the 2019 Budget Policy Statement, some ministries were subjected to budget cuts, running into billions of shillings.

Foreign Affairs suffered Sh15 billion funding cut. The TSC is seeking Sh27 billion to hire more teachers. Commissions such as the IEBC and the EACC also suffered budget cuts.

Read: We are concerned about Kenya’s debt burden, IMF tells MPs

Joshua Musyimi, a director at the office of the Controller of Budget, told Senators on Thursday the country is in the red in the wake of rising debt.

He said the country has crossed the Sh1 trillion mark. This leaves the country with only Sh600 billion in revenue to finance projects.

“Things are headed for the worst as the debt is rising yearly,” Musyimi told the Mandera Senator Mahamud Mohamed-led committee.

“We are collecting Sh1.6 trillion in revenue every year and we are paying a debt of Sh1.1 trillion annually. What we are left with we cannot even pay salaries.”

insolvent country

On the CDF, board chairman Maoka Maore recently told the House that every time they meet, the Treasury promises to release Sh2 billion a week, but nothing happens.

“The next time they have a chance of making a statement is when they release funds, like the Sh2 billion in the last two weeks. They said they will release another Sh2 billion this week but that is yet to happen,” the Igembe North MP said.

He said money flows slowly and MPs find themselves under pressure from demand for bursary and the other partially financed projects.

The cash flow crisis has also affected county governments. Nurses in some counties are on strike. Governors had to negotiate with thems, albeit with no promise of cash.

Suba South MP John Mbadi said, “We need to ask ourselves whether this country is struggling in terms of cash flow.”

He said the CDF cash crisis, where constituencies have effectively received only 19 per cent of their allocation, is happening for the first time.

“The cash flow problem is affecting NG-CDF, all other government agencies and county governments where the National Treasury sends money.”

“In fact, if you get the data on how much has gone to the counties, you will see why counties are not developing. If they get insufficient money, development suffers,” Mbadi said.

Read: State plans to roll over Sh78bn debt, reduce high budget deficit

Mbadi urged MPs to debate whether the country is struggling to meet its obligations. “If it is a company struggling to meet its day-to-day obligations, then it is moving towards insolvency. I tend to think that our country, without an admission from the National Treasury, is probably becoming insolvent.”

The government is now in the business of paying pending bills, flowing from past financial years, a situation that has affected current development plans.

Key among them is cash owed to maize farmers for produce supplied to the National Cereals and Produce Board. Sugarcane farmers are pushing for their pay, which has taken years.

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Author: worldwidenewscast

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