Kenya to only approve donor projects with secured funding, aligned to national priorities - Treasury CS Mbadi

Only donor-funded projects tied to Kenya’s development blueprints and with secured funding will proceed, the government has announced, in a move aimed at curbing waste and ensuring value for public money.

Speaking before the Senate Public Accounts Committee (PAC), National Treasury Cabinet Secretary John Mbadi said no project will be approved unless it supports national priorities and meets strict financial requirements.

This comes after the government began reviewing ongoing donor-funded programmes to ensure they comply with new conditions before being given the green light.

“We will not allow a donor-funded project to start if it does not meet the set conditions,” Mbadi told the committee chaired by Homa Bay Senator Moses Kajwang.

He explained that donor-backed projects must support at least one of the Vision 2030 objectives, which aim to transform Kenya into an industrialised, middle-income country. They must also align with the Bottom-Up Economic Transformation Agenda (BETA) or the manifesto of the sitting government.

The pillars of BETA, a flagship Kenya Kwanza administration policy, include agriculture, the micro, small and medium enterprise economy, housing and settlement and the digital superhighway.

“We will tie funding of any project to this vision,” he said.

Mbadi further stated that projects requiring state co-financing will only be allowed to proceed if the funds are available.

“If the requirement is co-funding and we don’t have cash, the project will not start,” he said.

The CS told senators that a team from the Office of the Deputy President and the National Treasury is reviewing all ongoing donor-funded projects to ensure they conform to Kenyan laws before they are approved.

He said the decision follows concerns over the high number of incomplete projects that continue to consume public funds without delivering results.

According to him, the review will help free up fiscal space and shield the government from excessive commitment fees tied to unused loans.

“We end up being charged commitment fees for money we have not used,” Mbadi told legislators.

In May, a report by the Auditor General to the National Assembly Liaison Committee showed that Sh515 billion earmarked for donor projects had not been utilised by the end of the 2023/24 financial year.

The report noted that some project agreements contained clauses that attracted commitment fees for undrawn amounts, causing wastage and poor value for money.

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Data from the Parliamentary Budget Office also revealed that the government has paid Sh18.9 billion in commitment fees over the past eight years.

Auditor General Nancy Gathungu, in her latest report for the 2023/24 financial year, revealed that taxpayers were also hit with Sh4.8 billion in “avoidable interest” on 17 donor-funded projects.

Her report further indicated that Sh2.5 billion was paid to contractors implementing 22 donor-funded projects without adequate supporting documentation. These payments, she noted, were made without work plans, contracts, invoices or delivery confirmations, breaching Regulation 104(1) of the Public Finance Management (National Government) Regulations, 2015, which requires accounting officers to ensure proper use of resources and maintain records for all financial transactions.