The-Accountant-Jul-Aug-2016

COVER STORY
Interest on Government debt is planned at 16.62% of total
revenue income for 2016, up from 12.95% for 2015: interest
on Chinese loans rises from Shs. 4.7 billion to Shs. 16.2
billion an increase of 244.68%; interest on the sovereign
bond rises from Shs. 16.4 billion to Shs. 19.4 billion; on
the Standard Chartered syndicated loan it rises from Shs.
2.5 billion to Shs. 5.0 billion, a 100% increase; foreign
borrowing used to be at very low rates of interest; but when
foreign borrowing is done commercially, the Government
will obviously have to pay a higher price for the money.
parties: one professional firm in Nairobi,
as reported by a newspaper in Kenya,
claims that 50% of Government revenue
is stolen; the actual number will never
be known because fraud by its nature is
concealed; and in Government there are
different sets of documents in different
areas of Government – it would be a
monumental task to reconcile these
numbers right through the system. The
people who steal these funds really do
the population of Kenya a great disservice:
a shortfall in the actual revenue
available to be spent on necessities, for
example the salaries of medical staff,
teachers, police persons, army personnel,
etc., additional tax has to be raised from
those who pay - the producers of goods
and the suppliers of services: this makes
it impossible for Kenya to compete with
countries like Dubai – where not only
much transit trade is now based, but where
tourism and manufacturing are booming:
last year 75 million people passed through
Dubai – 20 million more than the number
who passed through Heathrow, the busiest
airport in Europe. As the immense number
of single mothers in Kenya continue to
produce children who have almost no
chance of getting a job, crime levels in
Kenya will rise to an almost unbearable
level. But let us get back to the present and
the immediate future.
In the first table above, it can be
seen that the largest single line item of
expenditure continues to be the salaries
paid to Government teachers by the
Teachers Service Commission. 31% of
total Government expenditure in Kenya
is on education: spending by the “State
Department for Science and Technology”
is for tertiary education, with universities
consuming the lion’s share at Shs. 56
billion; Shs. 51 billion for free primary
and secondary education is included in the
“State Department for Education” number.
Where the 2016 number is greater than
its 2015 equivalent, I have displayed both
numbers in bold italics: you can see that
“Voted expenditure” has increased by
almost Shs 49 billion; in many cases the
2016 number is actually smaller than its
2015 equivalent: the amount that has
increased proportionally the most is that
entity which is giving overseas persons
such a bad impression of Kenya – the
“Independent Electoral and Boundaries
Commission” – where 2016 expenditure is
planned to be 460% of the 2015 number
– obviously because of the forthcoming
election.
Capital or development expenditure is
planned to decrease by almost Shs. 65
billion, with the State Department of
Transport having the largest decrease
in the amount of Shs. 34 billion:
expenditure in 2016 on the Standard
Gauge Railway will decrease for the
2015 figure of Shs. 147 billion to a
planned 2016 amount of Shs. 109
billion – a decrease of Shs. 38 billion.
Interest on Government debt is
planned at 16.62% of total revenue
income for 2016, up from 12.95% for
2015: interest on Chinese loans rises
from Shs. 4.7 billion to Shs. 16.2 billion
an increase of 244.68%; interest on the
sovereign bond rises from Shs. 16.4 billion
to Shs. 19.4 billion; on the Standard
Chartered syndicated loan it rises from
Shs. 2.5 billion to Shs. 5.0 billion, a 100%
increase; foreign borrowing used to be at
very low rates of interest; but when foreign
borrowing is done commercially, the
Government will obviously have to pay a
higher price for the money. What about
the sustainability of the Government’s
borrowing? The American Institute of
Certified Public Accountants has warned
the US government about the level of
its borrowing; the US government has
ignored the warning: it is likely that much
the same would happen in Kenya: one
Cabinet Secretary told me that he would
look into a matter of national concern –
he did nothing; let “the blood be upon our
heads and those of our children” – familiar,
isn’t it?
JULY - AUGUST 2016 33