Ksh145 Billion Math Error as Cabinet Approves Additional Spending in 2024/2025 Supplementary Budget

In Summary

• The government plans to increase spending by Ksh344.8 billion, raising concerns over borrowing and fiscal deficit management.
• Teachers are struggling to access medical services as hospitals withdraw due to unpaid Ksh9 billion premiums under the Ksh55 billion scheme.
• KCB has cut its base lending rate to 14.6% amid pressure from CBK to lower borrowing costs.
• KUSCCO executives face legal action over fraud that left the institution insolvent and put depositors’ money at risk.
• The government is gathering public views on plans to introduce tolls on major highways to fund road maintenance.
• Only 815 former NHIF staff will join SHA, while 922 will be reassigned to other public service roles.
• The government has blocked charities from rebuilding houses for Mai Mahiu flood victims, citing the need for a safety assessment.

The Cabinet on Tuesday, February 11, approved a Second Supplementary Budget seeking an additional spend of Ksh199.9 billion to the 2024/25 budget. A statement from the Cabinet indicated that Ksh125.1 billion would go to  recurrent expenditure while Ksh74.8 billion would go to development projects. Interestingly, the Cabinet had to issue two statements over what was described as a typing error. In the first statement on Tuesday afternoon, the Cabinet indicated it had approved an additional Ksh344.8 billion in spending, reversing earlier budget cuts made after the withdrawal of the Finance Bill 2024. After about two hours, after the story had been picked up by multiple media houses including Reuters, the Cabinet released another statement indicating it had actually approved an additional spend of Ksh199.9 billion. It was not immediately clear what led to the Ksh145 billion error. The Standard reports that the move raises concerns over increased borrowing, coming at a time when the country is grappling with debt sustainability challenges.The Cabinet’s proposal now moves to Parliament for approval. 

Harun Aydin, a Turkish businessman previously deported from Kenya, is a major beneficiary of the State’s affordable housing scheme through his company, MHOA Africa Limited, which has secured a multi-billion-shilling deal to build at least 100,000 homes. The Business Daily reports that MHOA Africa is in a joint venture with Demir Group, and together they are among the firms selected to build homes under Category A of the project. This category involves the construction of over 100,000 homes and offers benefits such as fast-tracked approvals and tax exemptions. Aydin’s involvement has raised concerns about crony capitalism, with critics questioning the political connections that led to his company securing such a large contract. The housing scheme is funded in part by a housing levy, which has sparked protests due to its additional financial burden on workers.

The Ksh55 billion teachers’ medical insurance scheme is facing a crisis as hospitals withdraw services due to unpaid premiums, with Medical Administrators (K) Ltd (MAKL) and Bliss Healthcare, linked to businessman Jayesh Umesh Saini, at the centre of the controversy. MAKL, responsible for contracting hospitals and paying bills, and Bliss Healthcare, which runs 63 clinics, operate under a consortium led by Minet Kenya Insurance Brokers. According to a report by The Daily Nation, the government has failed to pay Ksh9 billion in premiums since September 2024, leaving teachers struggling to access healthcare, with some waiting days for treatment approvals. The crisis has sparked protests from teachers' unions, who have accused the Teachers Service Commission (TSC) and Minet of mismanaging the scheme.

In a report by The Business Daily, KCB Bank Kenya has lowered its base lending rate by one percentage point to 14.6%, following a similar move by Co-operative Bank, which cut its rate to 14.5%. The reduction, effective from February 10, 2025, applies to all Kenya shilling-denominated loans except fixed-rate facilities. This comes after the Central Bank of Kenya (CBK) reduced its benchmark rate four times since August 2024 to 10.75% and warned banks against failing to pass on the benefits of lower rates to borrowers. KCB’s move is expected to ease credit access, following a 1.4% decline in private sector lending in 2024. 

Capital Business reports that the Ministry of Roads and Transport has invited public input on the draft Road Tolling Policy, 2025, with consultations set to begin on February 24, 2025. The policy aims to introduce tolls on key highways, including Thika Superhighway, Nairobi-Nakuru-Mau Summit Highway, and Southern Bypass, to raise funds for road maintenance and expansion. The proposal is expected to face public debate, especially following the recent increase in the road maintenance levy from Ksh18 to Ksh28 per litre of fuel.

Top executives of KUSCCO face arrest and asset seizure after a forensic audit revealed large-scale financial fraud that has left the institution insolvent to the tune of Ksh12.5 billion, putting depositors’ Ksh13.3 billion at risk, as reported by The Business Daily. The audit by PwC, handed to the Inspector-General of Police for investigation, uncovered forgery, bribery, fraudulent withdrawals, and manipulation of financial statements to report fake profits. Former KUSCCO officials, including its ex-Managing Director, are accused of diverting funds, overstating income, and siphoning money through inflated commissions and unauthorised withdrawals. The government has now barred KUSCCO from engaging in unlicensed financial activities and announced a major restructuring to cut its workforce and refocus on advocacy and training. Bd

The government has stopped Rotary International and Scann Foundation from constructing 14 houses for families affected by the Mai Mahiu floods, sparking outrage among victims who have been living in rental houses for nine months. According to The Standard, the charities had secured funds and identified beneficiaries but were ordered to seek clearance from the Ministry of Interior before starting construction. Some victims, who lost loved ones and property, expressed frustration over the delay, accusing the government of failing to fulfil its resettlement promise while blocking well-wishers from stepping in. A government official stated that construction was halted to allow a safety assessment of the area before any rebuilding could take place.

The Ministry of Health has confirmed that only 815 out of 1,737 former National Hospital Insurance Fund (NHIF) employees will transition to the newly established Social Health Authority (SHA), with the remaining 922 set to be redeployed to other government agencies. The Public Service Commission (PSC) has capped SHA’s staff capacity at 815, and the recruitment process will prioritise former NHIF employees who meet the required qualifications. Lawmakers have raised concerns over delays in implementing the new Social Health Insurance Fund (SHIF) and questioned the appointment process for SHA’s leadership, with some MPs accusing the board of favouritism, as reported by The Eastleigh Voice.