Time is drawing closer for the national budget for 2017/2018 to be read and published as required by the constitution of Kenya and Public Finance Management Act, 2012.
This budget is being prepared under the revised budget calendar that has taken into account the preparation for 2017 General Election meaning that the budget will be presented earlier than usual.
The CS for national treasury has already submitted to parliament the budget estimates for the FY 2017/18 which is a near reflection of what the budget will look like.
In Kenya, we are guided by Vision 2030 which is broken down into medium-term plans for implementation purposes. Accordingly, the 2017/18 budget will implement the third medium plan of vision 2030.
A budget also indicates sources of resources, and in this case, funds to be allocated to identified priority areas, budgetary deficit and proposed measures to bridge the deficit.
In reviewing and analyzing the budget, Kenyans will, therefore, be keen to assess whether priority allocations meet the country’s needs and are a reflection of actual state of economy.
Of equal interest also, will be the sources of funds and how the Government plans to plug any holes in the budget. These are significant budget issues with far-reaching implications to citizens.
Kenyans will be looking for a citizen-centric budget. This is a budget that attempts to address varied, common and collective needs of citizens in accordance with the mandate of the Government.
The key issues that affect Kenya, which the budget must address at the very minimum include: food security due to adverse weather patterns among other factors; high unemployment rate especially among the youth; inadequate accessibility and affordability of health facilities and services; high cost of doing business in general; relevance and quality of education; inadequate infrastructure, transport and logistics and insecurity.
If we as a nation, were to pick some vital lessons from the current drought and food scarcity experienced in some parts of the country, we would prioritize allocation of resources to agriculture, food production and storage together with water harvesting and storage.
We must consciously work towards our own food sustainability. A look at the highlights of 2017/18 budget indicates that Sh7.3 billion has been allocated to food security and agriculture with bulk allocation of Sh5B going towards inputs subsidy for fertilizer and seeds. It’s arguable whether this allocation is adequate or not. In my view, I think it’s time for a comprehensive and holistic review of our food sustainability strategy to influence allocation of resources.
High unemployment rate and especially among the youth continues to prevail in Kenya. The youth have great potential that if harnessed and channeled to proper use, can significantly contribute to the economic growth and development.
However, if not addressed, that potential asset can easily and quickly generate into a huge liability. The budget estimate has an allocation of Sh9.8 billion towards youth empowerment programme such youth enterprise development fund, youth employment and enterprise fund and women enterprise fund. These programs have been in existence for some time and it’s time they are reviewed for their effectiveness in achieving the very objective for which they were initiated. Also, the relevance of skills through education system and industrialization are key measures towards addressing this issue.
Our education sector is bedeviled with many challenges right from the elementary to the tertiary level. Universities in particular, have become mass production institutions producing graduates without necessarily considering relevance of skills required in the market.
This sector requires a complete overhaul to take into account the current mega trends both locally and globally and to reinforce skills in demand. Much focus needs to be placed on technical skills which are required for industrialization.
In the budget estimate, Sh13.4 billion has been proposed for enhancing access and transforming the educational system through e-teaching and e-learning whilst Sh83 billion for University education and Sh6 billion for technical and training Institutes among others.
Whilst the allocated amounts are arguable, they reflect realization that digital and technical skills are increasingly becoming relevant in the current world.
Provision of quality, accessible and affordable health care services is a primary responsibility of the Government. There’s a direct correlation between economic development and quality of health care that a nation provides to its citizens.
Our health sector has experienced significant challenges for a long time, ranging from the inaccessibility of health facilities, lack of appropriate medical care, inadequate medical equipment to the current prolonged doctors’ strike.
The devolution of this function seemed not to have benefited from collaboration between central and county governments.
This sector requires a holistic review to ensure impediments are removed for its overall objective to be realized.
The budget estimate has made key budgetary allocations to the two main referral hospitals in the country i.e. Kenyatta National Hospital (Kshs 9.5 billion) and Moi Teaching and referral hospital (Kshs 6.2 billion). Free maternal health care (Kshs 4.3 billion) and leasing of medical equipment (Kshs 4.5 billion) continue to be an areas of focus to the Government.
In the recent past, there has been significant investment in infrastructure, transport and logistics covering roads, rail, ports and energy. This sector continues to receive attention with significant budgetary allocations made in 2017/2018 budget estimates.
Notable allocations are in various roads projects which are both domestically and foreign-financed in the tune of Kshs 107 billion, subsidy for standard gauge railway (SGR) Phase I (Mombasa- Nairobi) for Kshs 15.5 billion and provision for SGR phase II (Kshs 69.6 billion). There is significant allocation to geothermal energy and last mile connectivity to aim at connecting all households to electricity.
The Government projects a Kshs 2.62 trillion budget in 2017/18 financial year representing a 5.7% growth over the 2016/17 budget which was at Kshs 2.48 trillion. This budget is largely funded by tax revenues projected at Kshs 1.70 trillion compared to 1.51 trillion in 2016/17 representing a 12% increase which is higher than projected economic growth of 5.9%. The Kenya Revenue Authority, the Government’s tax collection entity will have to work extra hard to raise the badly needed government funds to finance the budget.
KRA has in the recent past invested in technology to enhance its tax collection efforts. iTax which is KRA’s tax payers portal is an integrated system that ensures tax payers information is captured to enhance completeness and efficiency in tax collection.
All the tax returns are now made through this portal. KRA will therefore be expecting to maximize on this system to enhance its revenue collection.
There are also a number of other administrative measures which KRA is likely to adopt to enhance its revenue collection. These measures include intensive risk based audits across all taxes for compliance purposes and enforcing compliance with betting, lotteries, gaming and prize competition tax.
KRA will also be keen on excise duty on mobile cellular phones and other wireless telephone services, increase excise duty rate on money transfer services by cellular phone service providers and banks and increase excise duty on cigarettes and alcoholic beverages (sin tax).
There are also on going reforms in tax policy and revenue administration all aimed at enhancing KRA’s performance. Kenyans should therefore brace themselves for more aggressive tax collection by KRA and enforcement of tax laws.
A budget will not achieve its objective of delivering goods and services to the citizens and spurring economic growth unless there’s accountability mechanism and value for money is achieved on each and every budgetary spend.
In the recent past, there have been significant scandals out of budgetary allocations due to poor governance and lack of a propoer accountability framework.
It’s therefore important that as we take stock as a country on our 2016/17 budgetary performance and plan to embrace 2017/18 budget, we ask ourselves a critical question on how we should enhance accountability.
Benson Okundi is a Partner at PwC Kenya and the Government & Public Sector Leader for Africa