Rédaction Africa Links 24 with Daily Nation
Published on 2024-02-02 21:00:00
The annual budget making process in Kenya follows a structured approach as defined in section 35 of the Public Finance Management Act. This process begins with integrated development planning, encompassing both long-term and medium-term planning. Vision 2023 serves as the existing long-term plan, while various regimes and governors have formulated their medium-term plans such as the KK regime’s ‘Plan’ and county integrated development plans (CIDPs).
Following the planning phase, financial and economic policies and priorities are determined over the medium term, known as the medium-term expenditure framework (MTEF). This phase often sees a transition period when a new administration attempts to align the existing priorities with their own, while maintaining necessary continuity in ongoing projects and civil services.
The formulated medium-term plans are then translated into revenue and expenditure estimates in the Budget Policy Statement (BPS), tabled for adoption by Parliament by February each year. This process plays a crucial role in turning a regime’s ideas and policies into funded and actionable programs, mirroring the priorities of the government.
Once the estimates are prepared, the three arms of state – national government, the Judiciary, and Parliament – submit budget estimates separately for approval by the National Assembly. Subsequently, the National Assembly enacts the Appropriation Bill, along with other necessary Bills to implement budgetary proposals, including the debt management strategy and finance bill.
The most recent Budget Policy Statement proposed 4.2 trillion shillings in expenditures, with a significant portion to be financed through taxes and borrowing. The regime suggested a range of taxation measures, including the re-introduction of minimum tax, new VAT on education and insurance services, excise duty reform for alcoholic beverages, and exploration of taxation in the agriculture and informal sectors.
However, the formulation of revenue estimates often leads to overstating tax revenues, resulting in a hidden budget deficit and pending bills. Revenue shortfalls, coupled with debt servicing and increasing public debt, contribute to the financial challenges faced by the government. As a result, the fiscal consolidation and deficit reduction targets outlined in the budget policy statement may not be attainable.
Going forward, the medium-term expenditure framework maintains these trends, indicating a bleak financial outlook. The government’s reliance on borrowing and taxation to finance expenditures calls for a careful re-evaluation of fiscal policies and revenue strategies to ensure sustainable financial management.
In conclusion, the annual budget making process in Kenya involves various stages, from integrated planning to the formulation of revenue and expenditure estimates. However, challenges related to revenue shortfalls, public debt, and deficit reduction efforts highlight the need for strategic financial management and policy reform to ensure sustainable economic growth and stability.
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