Business

State agencies feel the pinch as shilling depreciation impacts budget spending

Auditor General Nancy Gathungu. Her report exposed unexplained expenditures amounting to millions of shillings at the National Cancer Institute. (Photo: Office of the Auditor General)

By Saleem Abdi | Wednesday, February 7, 2024

The Office of the Auditor-General said variances between prices that were budgeted and actual prices in the market were so high that some commodities couldn't be purchased.

The constant increase of commodity prices is affecting budget execution for government agencies.

The agencies have found the funds they had budgeted to purchase items insufficient forcing them to buy less or forego, it altogether.

Keep reading

The increase in prices has been due to the fall of the Kenyan Shilling which has depreciated against the dollar at a high rate since last year.

Currently, the shilling is exchanging at about 160 units against the US Dollar, according to official data by the Central Bank.

While addressing the concern, the Office of the Auditor-General noted that during the past financial year, it had challenges procuring some goods and services due to fluctuations in prices.

The office observed that variances between prices that were budgeted and actual prices in the market were so high that some commodities could not be purchased.

“Fluctuation of market prices has rendered most of the framework contracts for the procurement of goods and services inexecutable due to price changes. Some items could not be procured because there were high variances between the planned costs and the expected costs of acquisition with the budgeted amount,” the Auditor-General stated.

A report capturing the office’s activities in the year ending June 2023 showed that the office spent Sh1.75 billion to purchase goods and services.

The spending was a seven per cent increase from Sh1.64 billion the office spent during the previous year.

Rise in commodity prices

The revelation by the office is a pointer to challenges many public agencies continue to face as commodity prices continue rising, which has affected goods and services across different sectors.

In the current year that ends June 2024, the Auditor-General’s office raised budgets for procurement of different items by margins varying up to 200 per cent as compared to last year, perhaps in the projection of a similar trend.

Among items the office has raised prices it will be purchasing this financial year are branded biro pens (from Sh40 to Sh50 each), medium staplers (from Sh1,000 to Sh3,000), HB Pencils (from Sh70 to Sh100) and 43G pritt glue (from Sh200 to Sh500).

The national government during the three months ending September 2023, spent Sh19.74 billion under the budget line on the use of goods and services, including travel (Sh5.3 billion).

“Compared to a similar period in FY 2022/23, travel expenses increased by 27.6 per cent from Sh3.37 billion to Sh4.3 billion. The Controller of Budget (COB) recommends that the National Government reduces expenditure on non-core items, including travelling expenses, in FY 2023/24," the COB stated in the report analysing expenditure in government between July and September 2023.

The savings should then be channelled towards addressing the cost of living for Kenyans and other priority programmes.