The budgets of parastatals earmarked for mergers and dissolutions in July have been slashed by more than 40 percent on average, surpassing President William Ruto’s goal of 30 percent.
The Treasury projects to save more than Sh2.3 billion from proposed mergers of about 35 State corporations in the first phase of restructuring through cuts on the budget for administration and maintenance of offices as well as the remuneration of staff.
The President said last Thursday that heads of parastatals had agreed to cut recurrent budgets by nearly a third. This is part of austerity measures for State corporations in a far-reaching rationalisation plan backed by the International Monetary Fund.
Treasury PS Chris Kiptoo says the proposed austerities will largely hit non-essential expenditures such as membership to clubs for top managers, repairs, and hiring of staff.
The brutal budget cuts followed a series of top-level meetings, which started on March 26 when Dr Ruto summoned board chairs and parastatal chief executives to the State House.
He told the meeting that some State-owned entities had become a “drain on the Exchequer” following years of losses.
“I was very pleasantly surprised that every parastatal was willing to contribute to making sure that we live within our means,” Dr Ruto told the annual Prayer Breakfast meeting in Nairobi last Thursday.
“And each one of them went back, submitted their reports, and reduced their recurrent budgets by 30 percent.”
Analysis of recurrent budget allocations for the next financial year, however, indicates the proposed outlays for some parastatals, excluding appropriations-in-aid [revenue they generate while delivering public service], have been cut by as much as three-quarters.
The expenditure cuts are in line with the Treasury’s guidelines through a March 27 circular, which made it clear that entities identified for mergers and winding up will receive minimal budgetary allocation for the year starting in July.
The financial risks associated with struggling parastatals amounted to Sh1.24 trillion by the end of the last financial year, in June 2023.
These include Sh145.4 billion in guaranteed loans, Sh111.80 billion in non-guaranteed loans, and Sh983.20 billion in on-lent loans. “We will shut them [loss-making entities] down, we will get their employees to go and work somewhere else, and at least we will stop making the losses,” Dr Ruto warned on March 26.
“And I want some of those institutions to volunteer [to close down]. Some of them should start telling us, ‘hii institution yetu tafadhali fungeni, sisi tutafutie kazi mahali pengine twende tufanye, halafu ndio wakenya wawache kupoteza pesa zao [please close our institutions and assign us other jobs so that Kenyans stop losing money].”
Presidential Council of Economic Advisers, chaired by David Ndii, and the Treasury team, led by Dr Kiptoo, last month identified about 35 entities for restructuring.
Some of the chief executives for the targeted parastatals have, however, protested the austerities and have requested to be excluded from the plan in the upcoming year.
“The Treasury has received numerous requests from MDAs [State ministries, departments and agencies] for exemption of State corporations from rationalisation,” Dr Kiptoo said in a presentation to lawmakers.
“We will, therefore, be submitting to the National Assembly proposals for exemption from the rationalisation of State corporations.”
The budget analysis shows that the net recurrent budget for Kenya Water Institute has been cut the most, from 183 million in the current fiscal year to Sh44 million—a 75.74 percent reduction.
The firm is set to be merged with the Regional Centre on Groundwater Resources, Education, Training and Research whose recurrent budget has been reduced by 9.42 percent to Sh62.5 million. It is followed by the Kenya Investment Authority’s (KenIvest) budget, which has been slashed 71.23 percent to Sh90.88 million from Sh315.91 million.
KenInvest is proposed for consolidation with Kenya Export Promotion and Branding Agency (Keproba), Kenya Tourism Board (KTB), Tourism Research Institute (TRI) and Kenya Yearbook Editorial Board.
Keproba’s budget is down 50.31 percent to Sh217.43 million, KTB’s by 58.77 percent to Sh114.06 million, TRI’s by 67.57 percent to Sh18.46 million, while Year Book’s spend has been reduced 37.94 percent to Sh70.75 million.
The recurrent expenditure for the Women Enterprise Fund (WEF) has been cut the most among affirmative funds ahead of the proposed merger with the Youth Enterprise Development Fund (YEDF) and Uwezo Fund. WEF management faces a 72.71 percent cut in the recurrent budget to Sh81.1 million, YEDF’s has been shaved 61.54 percent to Sh125.02 million, while Uwezo’s is down 8.46 percent to Sh140.70 million.
Kenya National Qualification Authority will suffer a 51.59 percent cut to Sh145.22 million if the estimates are approved by lawmakers. The entity is earmarked for a merger with Commission for Universities Education whose expenditure has been increased 10.38 percent to Sh259.44 million.
