Project funds absorption declines to five-year low
Auditor-General Nancy Gathungu.
Under-absorption of development funds in Kenya has fallen to a five-year low, new analysis shows turning the spotlight on the country’s spending plans.
Auditor General Nancy Gathungu says in the fiscal year 2023/24, only Sh500.2 billion was utilised on development projects against a budgeted Sh708.8 billion, representing under absorption of Sh208.6 billion or 29 per cent.
This marks the lowest absorption rate in five years, pointing to flawed expenditure and project planning.
"In addition, the audits of donor-funded projects indicate that the projects continue to experience low absorption of funds. For instance, in the financial year 2023/2024, fourteen (14) projects which had total project allocations of Sh515.1 billion had not utilised Sh304.4 billion or 59.1 per cent of the total allocation,” Gathungu said.
In 2019/20, there was an under-absorption of Sh71.2 billion or 10 per cent, while in 2020/21 the figure stood at Sh61.5 billion or nine per cent. In 2012/22, there was Sh171 billion under-absorption of development funds or 25 per cent, while in 2022/23, some Sh127.8 billion wasn’t absorbed, translating to 22 per cent.
Gathungu said some of the projects affected by under-absorption of funds have clauses that attract commitment fees for any undrawn amounts, leading to wastage of funds and lack of value for money.
“Indeed, between the fiscal year 2020/2021 and 2023/2024, the government paid commitment fees totalling Sh6.569 billion on undrawn amounts in respect of loans signed between the government of Kenya and foreign lenders,” she said.
A commitment fee is a payment that is charged by a lender to a borrower to compensate the lender for keeping a credit line open. It also secures a lender's promise to provide the credit on the agreed terms at specific dates, regardless of the conditions of the financial markets.
The Auditor General's office said some of the projects hit by low budget absorption included the East Africa Skills Transformation and Regional Integration Project, which was to run for five years from 2018 to 2024 with an approved budget of Sh1,086,168,320 from the World Bank.
But as of June 30, 2024, the project had drawn 5,328,282 Euros, equivalent to Sh526,361,538 or 61 per cent of the donor commitment for the five years the project had been in operation, leaving an undrawn balance of Sh137,330,791 for the remaining one-year period.
Kapchorwa-Suam-Kitale and Eldoret Bypass roads project was also affected by under-absorption of funds. It had an undrawn balance of Sh8,227,612,404, which represents 35 per cent of the expected total funding, by September 30, 2023.
