Why Uhuru must fix Budget anomaly

The budget is a vital instrument that is ordinarily used by governments to enumerate its national policy whilst also highlighting on the cost implications of its programmes and the possible sources of revenues in a given fiscal year.

Further, it is acknowledged that a good budget system is founded on several objectives including; maintenance of stable macro-economic environment, enhancing fiscal discipline, attainment of allocative efficiency and operational/technical efficiency.

In the circumstances of Kenya, the quest for budget reforms has inter alia been premised on the need to attain and maintain fiscal discipline, ensure equity whilst imbuing transparency and public participation in the Budget process.

Prior to the passage of the new constitution, various statutes together with the repealed Constitution under Sections 48, 99 to 105 lay a framework for the conduct of public finances related activities in the country.

Statement of the Problem:
Treasury and the National Assembly are locked in a dispute as to how the next budget ought to be presented. On its part, treasury prefers to proceed the old way where the finance minister prepares both the budget estimates and the Finance Bill then proceeds to the floor of the house to defend the budget proposals.

On the other hand, the National Assembly through the Parliamentary Budget Committee contends that treasury sticks to the provisions of the New Constitution and in that regard, the budget ought to be submitted as per the constitution especially as is provided for under Article 221. In their view, treasury ought to have submitted the revenue estimates and proposals for government expenditure two months (end of April, 2011) before the expiry of the current financial year in June, 2011.

The Constitution of Kenya – 2010
On 27th August 2010, Kenya adopted a new constitution which has an entire chapter (12) dedicated to Public Finance. This chapter on Public Finance has revolutionized Public Financial Management and is a radical departure from the status that existed as was provided for by the former constitution.

One of its core principles of Public Finance is outlined in Article 201 (a) of the Constitution and it demands for openness and accountability, including public participation in financial matters.

As to the budgetary process, Article 221 is quite instructive;

221. (1) At least two months before the end of each financial year, the Cabinet Secretary responsible for finance shall submit to the National Assembly estimates of the revenue and expenditure of the national government for the next financial year to be tabled in the National Assembly.
(2) The estimates mentioned in clause (1) shall–
(a) include estimates for expenditure from the Equalisation Fund; and
(b) be in the form, and according to the procedure, prescribed by an Act of Parliament.

(3) The National Assembly shall consider the estimates submitted under clause (1) together with the estimates submitted by the Parliamentary Service Commission and the Chief Registrar of the Judiciary under Articles 127 and 173 respectively.

(4) Before the National Assembly considers the estimates of revenue and expenditure, a committee of the Assembly shall discuss and review the estimates and make recommendations to the Assembly.

(5) In discussing and reviewing the estimates, the committee shall seek representations from the public and the recommendations shall be taken into account when the committee makes its recommendations to the National Assembly.

At the outset it is important to emphasize that the Chapter on Public Finance is operational and took effect immediately the new constitution was promulgated. Specifically Article 221 is operational to its fullest extent and places clear obligations on various institutions.

Article 221 bestows the Cabinet Secretary for Finance (and in light of the transitional provisions in the constitution, the current Minister for Finance) with a constitutional obligation to provide the National Assembly with the estimates of the revenue and expenditure of the national government for the next financial year at least two months before the expiry of each financial year.

In an apparent recognition of this obligation, the Permanent Secretary to the Treasury issued the Treasury Budget Circular No. 2/2011 dated 17th March 2011, to all Accounting Officers.

The contents of this Circular are categorical and in accordance with the Constitution and read, in part, that it is,
"  intended to guide ..Ministries, Departments and other government agencies (MDAs)… on planning for FY2011/12 Budget which will be presented to Parliament in accordance with Article 221 of the new constitution."
It is also instructive that towards the end of the constitutional deadline in April, Treasury sought Parliament\’s leave to extend the period for presenting the estimates by one month on the basis that the estimates could not be prepared within the constitutional timelines. It is clear from these acts that compliance with Article 221 was never in doubt. 

The intent of Article 221 is to enable the National Assembly participate effectively in the budget process. It is on this basis that the constitution requires that before the budget estimates presented by the Minister are considered by the National Assembly, the latter is expected to constitute a committee with the task of discussing and reviewing the estimates and as a result, making recommendations to the Assembly.

The committee is also mandated to seek representations from the public and take the same into account when making its recommendations to the National Assembly. This requirement resonates with the provisions of Article 201 (a) of the Constitution which in principle calls for openness, accountability and public participation in such financial matters.

It thus means that the provision of these revenue estimates and expenditures reports in advance, serve to give transparency to the process whilst also opening the said reports to public scrutiny as is demanded by the constitution. This is provided for as a right on the part of the public in terms of their participation.

Issues have been raised on the implications of the absence of the laws contemplated by  Article 221(2)(b) which stipulates that the estimates under Article 221 (1) shall be in the form and procedure provided for by an Act of parliament. Tied to this is the provision of Article 225 (1) which calls for an Act of Parliament to provide for the establishment, functions and responsibilities of the national treasury.

It must be noted that Article 221(1) is a constitutional provision which takes precedence over legislation. In the context of the Constitution and the requirement for the passage of enabling legislation, the main purpose of such legislation is to supplement or in the best manner possible, give effect to the provisions of the constitution.

It cannot contradict or take away that which the constitution has mandated. Thus the current absence of the Acts contemplated under Articles 225(1) and 221(2)(b) does not negate the essence of the constitution as already provided for in Articles 221(1)(3)(4)(5) of the constitution. In any event existing statutes including the Government Financial Management Act 2004, the Financial Management Act 2009 and existing Government Financial Regulations can provide guidance on the form and procedure of presentation of the estimates, provided that those statutes comply with Section 7 of the 6th schedule which provides that all existing law, whilst applicable, must be

"construed with the alterations, adaptations, qualifications and exceptions necessary to bring it into conformity with this Constitution"
From the foregoing it is clear that Treasury, in failing to present the estimates to the National Assembly within the constitutional timelines is in violation of Article 221 of the constitution. This violation ought to be redressed as urgently as possible so as not to impede the constitutional implementation process, particularly the need for public participation in the budget formulation process.

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