Mystified by Eurobond figures? Actually, our problems go much deeper than that

Saturday February 6 2016


By Jason Lakin

Our ongoing debate about the Eurobond highlights a very basic and very old fact: The information provided to Kenyans about how the government uses public money is not transparent.

It would appear that most Kenyans are also struggling to put the Ksh200 billion or so in question in any meaningful context. This suggests that the public has fairly limited engagement with the information that Treasury does make available.

This is a convenient opportunity for us to understand better the Kenyan budget, and to agree on the kind of information we want to be made available in future. This is not a Eurobond issue per se, since Eurobond money is actually fairly small in the grand scheme of things (and much smaller than what the government collects in taxes every year). It is a more fundamental issue in the management of public money.

To elucidate these points, I will rely on two documents from FY 2014/15, both of which are official government sources: The Treasury’s fourth quarter Quarterly Economic and Budget Review and the annual report from the Controller of Budget.

The most basic question we should want to ask about FY 2014/15 is how much money we spent. Unfortunately, the Controller has two different figures for this amount in the annual report: Ksh1.602 trillion and Ksh1.632 trillion. The Treasury report has a third figure for total spending: Ksh1.616 trillion. Those differences are fairly small, but unexplained.

Let’s turn to development spending, where the differences are more substantial. According to the COB report, Kenya spent Ksh319 billion on development in 2014/15. According to the Treasury, that number was Ksh508 billion. However, the Treasury’s report also suggests elsewhere that total development spending was only Ksh408 billion. These are pretty massive discrepancies.

Obviously, given that the differences on the development side are very large, but the differences in total spending are fairly small, there must also be other differences in the categories of spending, such as recurrent. Indeed, there are.

COB says recurrent spending was Ksh1.055 trillion, while the Treasury says it was Ksh839 billion. The other main category of spending is the transfer to counties, which was Ksh229 billion (or Ksh258 billion, if you include conditional grants). County spending is more or less agreed across the two sources.

What explains these differences between the recurrent and development figures? Recurrent spending consists mainly of two things: Spending on ministries and spending on what are called “consolidated fund services” (CFS), mostly debt payments and pensions.

COB says we spent Ksh604 billion on ministries and Ksh432 billion on CFS. Treasury says we spent Ksh664 billion on ministries and Ksh210 billion on interest payments and pensions. I can’t explain these differences.

On the development side, there are also only two main items: Funding from the Treasury, and funding from “Appropriations in Aid” (AIA). AIA is funding that comes from donors directly to ministries and projects rather than to Treasury. Here there are major discrepancies again both within and across the reports. COB reports Ksh319 billion in development spending but only Ksh270 billion in exchequer issues. Normally, this would imply that there were about Ksh50 billion in AIA (that did not pass through the exchequer).

The same report has a figure of Ksh61.8 billion for development AIA in one place, and a figure of Ksh5 billion elsewhere. If that weren’t bad enough, the report has a total AIA figure elsewhere of Ksh206billion and Ksh13 billion of this as recurrent AIA, which is always a minority, leaving a balance for development AIA of Ksh193 billion. Using this figure, however, COB’s estimates of total expenditure would be much higher than the Ksh1.63 trillion mentioned earlier.

None of these match the Treasury’s own figures for development AIA, which seems to be Ksh233 billion (although Treasury also splits AIA into several types in different places, and adding these together yields Ksh240 billion).

The part of the development budget funded through the exchequer is also different between the different sources, but is much closer: Treasury estimates it at about Ksh273 billion, while I estimate COB’s figure is closer to Ksh257 (though it depends which AIA figure you believe).

This suggests that the main difference on the development side is the amount of AIA. COB does mention that they do not get good reports on AIA from ministries, which could explain why they have much lower numbers.

So, in summary: COB has the government spending more on debt repayment, and receiving and spending less in donor funding than Treasury. The differences are in the hundreds of billions and, after several hours of reviewing, I am still not sure what the causes of these differences are. And these are, every quarter and every year, the official sources of information on budget implementation in Kenya.

We have bigger problems than just the Eurobond, folks.

Jason Lakin is Kenya country director for the International Budget Partnership. E-mail: [email protected]