Half of the 1,000 public projects being implemented in Kenya have stalled and will require a staggering Sh1 trillion to complete, the International Monetary Fund has disclosed, raising concerns about the country’s planning and public spending decisions.
The huge number of stalled projects, which comes 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 with latest Central Bank of Kenya data showing that the cash circulating outside banks dropped to Sh176.9 billion in September — the lowest since September 2015.
“the IMF said in a fiscal transparency evaluation update on Kenya released on Wednesday that the number of stalled projects is increasing, and is currently estimated at approximately 500 (half of all ongoing projects), because of non-payment to contractors, insufficient allocation of funds to projects, and litigation cases in court,”
“Expenditure estimated at Sh1 trillion is required to finalize these projects,” it further says. “The rapid increase in public investment since 2010 occurred without enough screening for project viability and readiness before they entered the budget”.
The Bretton Woods institution noted that the lack of effective gatekeeping has allowed many new projects to enter the budget pipeline — creating challenges in the financing of ongoing projects. Many of the public projects lack a cost-benefit analysis as well as standardized appraisal and selection plans, effectively failing to match expenditure to available financial resources and producing white elephant projects. The disclosure follows meetings between the IMF and top officials from the National Treasury, the Central Bank of Kenya (CBK), the Kenya Revenue Authority (KRA), the Kenya National Audit Office (KENAO), the Controller of Budget (CoB) and other government agencies, parastatals and regulators that handle or oversee public projects in preparing the report.
Revenue performance has failed to hit the target at the same time, meaning that the government has had to borrow heavily to finance these projects.
Servicing the debt and financing a large recurrent expenditure bill takes up the lion’s share of State revenue, leaving the Treasury unable to pay development expenditure bills and thus stalling projects.