Treasury purge an opportunity for reform

Columnists

Treasury purge an opportunity for reform

National Treasury building in Nairobi. FILE PHOTO | NMG 

Both the National Treasury minister and Principal Secretary were abruptly forced out of office this week. It was a complete decapitation.

Clearly, Henry Rotich had totally lost control over the affairs of the National Treasury. President Uhuru Kenyatta has a good opportunity to make big changes to give a new direction to the running of the nerve centre of economic policy-making.

Which begs the question: What areas of the National Treasury are in dire need of urgent change? Here is my take. First, the National Treasury must be made to curtail its reckless and insatiable appetite for expensive and foreign commercial debt.

The problem will not be resolved by merely bringing in new technocrats at the Treasury building. We must not forget that the main reason our external debt register is today riven with expensive foreign commercial debt is inability of the National Treasury to exert political power. I want to see a minister who after coming into office will immediately crack the whip, invoke his powers under the Public Financial and Management Act (PFMA) and declare that ministries and parastatals will no longer be allowed to sign MoUs and shady commercial contracts with dodgy foreign contractors.

The new minister should announce that all commercial agreements must emanate from the National Treasury. As we have seen, the origins of the Arror and Kimwarer dam scandals were the commercial agreements that the Kerio Valley Development Authority(KVDA) signed with those broke Italian contractors.

The shady commercial agreements is the avenue used to sneak in kickback motivated projects into the government’s spending plans. In most cases, the National Treasury is only brought in at the later stages when financial agreements are being negotiated.

Even more intriguing is that the masters of deceit have the temerity to label these kick-back motivated projects Government-to-Government(G-G) and therefore pretend that some foreign governments would provide the money to fund them.

Mr Kenyatta must not waste a good crisis. This is the time to experiment with major institutional reforms at the National Treasury. For example as we deal with the debt problem, let’s experiment with the idea with the much-talked about Treasury management agency.

We want an institution that can assume the role of issuing and redeeming government paper.

We can give the Treasury management agency the task of minimising the risk- adjusted cost of public to a GDP- debt level we want over a defined period.

When and why did we drop the idea of establishing a Treasury Single Account? As far as cash management is concerned, the government flies blind because as chief financial officer of the government, the Treasury Cabinet Secretary has no sight of the cash sitting idle in more than 10,000 accounts belonging to ministries. So, the government goes to the money market every week to borrow through Treasury Bills without realising that most of the money it borrows each week –mainly from commercial banks- is the money ministries and government department have left sitting in those idle accounts.

The second area in dire need of reform and change of direction is public procurement.

As we all know, the National Treasury is in charge of procurement. As a matter of fact, all the agencies handling procurement, including the PPOA and the review board, fall under the National Treasury. The scheme of service of all procurement officer working for the National government is run and operated from the National Treasury.

Today, procurement is in a total mess across both county and national government department.

The problem with the current system is that it gives too much weight to meeting procedures. Our tendering system is about technical evaluation committees, members of financial evaluation committees and tender award committees. Yet most cases, you will find that even where all procedures were met, mega corruption still happens.

So, what we need now is institutional reform. We need to create a new autonomous institution and put it in charge of buying all common user services for the government. And we must insist that because of bulk purchases, the government must all the time buy at a discount off the market price. I can’t claims to have all the answers on what must be done in this area. Before, we introduce radical reforms at the National Treasury, we must first accept that the nerve centre of economic policy making is in the intensive care unit.

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