The National Treasury has operationalized the National Single Account in a move to streamline public funds.
The system will help track cash flows within state organs as well as check misappropriation and embezzlement of public funds.
Previously public funds were held in multiple accounts at the Central Bank of Kenya, National Bank and the Consolidated Bank where the government has a stake.
The Creation of the Treasury Single Account is part of the Public Finance Regulations 2017 where the National Treasury says all public funds would be deposited into that account and all payments would be executed from the same account, putting the government in a position to monitor its finances.
It will improve government’s capacity to assess its financial position through the account ledger. The government will also be able to generate financial statements from the account which will increase accountability in the public space.
All national government revenues will be passed through the revenue collection account, credited to the exchequer account from which outflows will be managed.
Financial services firm Britam says the government needs to clear the air on whether the funds will be deposited in the Central Bank of Kenya or through another vehicle.
Britam says there is a risk that significant deposits will flow from the banking system to the Central Bank leading to tighter liquidity in the banking system in case the funds are to be removed from the financial system.
The system will also help the government avoid instances where government entities lock in funds in term deposits while still receiving budgetary allocations.
On Tuesday Equity bank chief James Mwangi said the market is currently going through a major liquidity crunch which is hurting the local financial sector.
The National Treasury has been transferring all financial transactions of government ministries and entities to the Integrated Financial Management Information Systems (IFMIS).
The IFMIS system was launched in August 2014 to monitor how all ministries, departments and agencies utilize funds on a real-time basis in a bid to improve budget implementation.