It has emerged that the Treasury may have to set aside additional Sh5 billion to fully finance the mortgage entitlements for the 418 MPs or more than double the amount that is currently available.
People familiar with the state of Parliament’s finances said the House mortgage scheme is financed to the tune of Sh3 billion but each of the 349 MPs and 67 Senators is entitled to Sh20 million, adding up to a total of Sh8.36 billion.
Parliament’s home loans are repayable at an interest rate of three per cent per annum and must be cleared within five years.
Michael Sialai, the senior deputy Clerk of the National Assembly, told the Business Daily that the parliamentary mortgage scheme, which started in 2002, has about Sh3 billion but it remains to be seen if it can fully cater to the MPs’ needs.
“We have about Sh3 billion that operates as a revolving fund,” he said.
Parliament fully finances the MPs mortage scheme and has been partly recapitalising the fund over the years through the national budget.
“Unused funds are not returned to the exchequer at the end of the financial year but is retained for use by other members who are qualified to benefit from the scheme,” Mr Sialai said.
It is not known what fraction of the 418 MPs will take up the mortgage loans but the fact that more than three quarters are new means the applications are likely to be more than the amounts available.
“Those already owning homes in Nairobi or those serving their second, third or fourth terms do not need the home loans easing pressure on the Parliamentary Service Commission,” Mr Sialai said.
Additional revenue will be generated from the pool of money from the fully-paid loans that were disbursed to Members of the 10th Parliament.
Should the demand for loans exceed the Sh3 billion, Parliament will have to ask the Treasury for fresh injection of funds into the mortgage scheme — adding a fresh financial burden to an already overstretched exchequer.
The Treasury is facing a herculean task of balancing a budget whose limits have been significantly extended by the lavish promises that Jubilee alliance made to the electorate in the just-concluded election as well as the birth of a new government structure with 47 devolved units and a bicameral parliament.
A slowdown in revenue collection and slow disbursement of donor funds have left the government in a tight financial position forcing it to run on borrowed money that has pushed the national debt level to half of the GDP.
Higher parliamentary remuneration packages, including a Sh7 million car loan entitlement, are inconsistent with President Uhuru Kenyatta’s quest to reduce the public wage bill that currently stands at 12 per cent of the Gross Domestic Product (GDP).
The situation will get even worse should the MPs succeed in reversing the recent cut in their salaries to the Sh800,000 per month that their counterparts in the 10th Parliament earned.
Parliament is also relying on the fact that it takes four to six months to process amortgage loan, giving it time to capitalise the fund.
“It can take between four and six months to conclude conveyance — including identification of property, charging the title deed among other approval processes,” Mr Sialai said.
MPs have been agitating for higher pay since parliament was officially inaugurated on April 16 with the Sarah Serem-led Salaries and Remuneration Commission (SRC) as their main target.
The commission early this year nearly halved the MPs salaries from a high of Sh851,000 that the legislators in the 10th Parliament earned to Sh543,500.
Igembe South MP Mithika Linturi has filed a notice of intention to petition Parliament to start a process that will lead to the removal of the Serem commission on 10 grounds that “it grossly violated the Constitution” in reviewing the MPs salaries.
The petition is due to be formally introduced to the House Tuesday afternoon. MPs argue that the reduced salary is not commensurate to their work and “is too little to meet their needs” including servicing the mortgage and a Sh7 million car loan.
Mr Sialai said the repayment period for the mortgage or the car loan, which also attracts a three per cent annual interest, is too short given the limited time MPs have to pay.
“Most MPs will find that the repayment period is too short given that the Constitution demands that the next General Election must be held on the second Tuesday of August every five years,” Mr Sialai said.
MPs or Senators who take the loan by next month will have at least four and a half years to pay. The 11th Parliament’s term will end at least three months to the General Election meaning that the House will dissolve sometime in May 2017.
“Most will find that the required level of monthly debt servicing is too high and this could turn into a big discouragement for the MPs,” Mr Sialai said.
A number of MPs are still undecided whether take the mortgage given the SRC’s decision to slash their salaries.
“How will you take mortgage of Sh20 million on a salary of Sh542,500? How will you repay it? What an MP takes home after taxation of the salary is not even enough to meet the repayment amount,” said Barua Njogu, the Gichugu MP.
It will be virtually impossible for many MPs to own homes in Nairobi through the mortgage scheme because of the low salaries, he said.
- Business Daily
