Challenges still abound in public-driven budgeting process

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By: David Wanyoike

Kenya has undertaken extensive reforms to its budgeting system following the adoption of the new constitution in August 2010. Prior to the promulgation of the new dispensation, the budget making process was a preserve of the Treasury and the political class. The public contributions which are fundamental in the identification of the key development issues, strategies and sector priorities were never given consideration.  The game plan has however changed and the public participation in the budget making process is now anchored in the constitution.  

The Treasury has already sought for public participation in this year’s budget making process, a move many view to have been sparked by the need to avoid similar beating meted out on the then Minister for Finance for exclusion of the public in the 2011/12 budget making process. The budget making process for financial year 2011/12 was greeted with major uproar by the parliamentarians following the failure by the Minister for Finance to constitutionally present the budget estimates to the parliament two months before the presentation of the budget speech. This move culminated into the Minister for Finance being prevented from making the presentation of the budget speech in the parliament and instead a budget statement was read completely deficient of the traditional pomp and colour that characterized the past budget events. 

Although the inclusion of the public in the budget making process is a praiseworthy step given that the public is directly affected by the process both as recipient of services rendered by the government as well as the tax payer, challenges abound regarding the feasibility of such participation. For instance, is there a mechanism in place to monitor the number of public submissions made? What is the criteria applied in accepting or rejecting the submissions? Is the criterion within the public knowledge?

It may still be too early to celebrate the dawn of a public participative budget making process since this is a process riddled with myriad challenges ranging from among others infrastructural and financial factors. Arguably, the country’s budgeting system is likely to remain marred by key weaknesses inherited from the previous system given that the system is still under experimentation and the new constitution dispensation is still ongoing. Indeed, Kenya’s current budgeting infrastructure remains debatably basic and a lot needs to be done to build it up.

Sound reforms in the budgeting system encompasses the entire budgeting cycle: formulation, approval, implementation and audit. In spite of public inclusion in the budget making process, Kenya’s budgeting reforms could possibly still be at the first two stages. The immediate fundamental challenge is the creation of institutional infrastructure suitable for a modern budget process and the polishing up of skills of the budget making stakeholders. A full understanding of the budget planning and preparation system is essential, not just to derive expenditure projections but to be able to advise policymakers on the feasibility and desirability of specific budget proposals from a short-term or long-term perspective.

Kenya has in the past applied the bottom-up budget preparation approach which has principally been driven by the requests from the ministries based on their spending. Without a firm top-down limit, the ministry of finance could only challenge proposals on technical or policy grounds, rather than in terms of affordability constraints and priorities within a fixed total. Usually, the deficit arising through this procedure would not be sustainable. Since the country has in the past proven to be perennially overoptimistic in revenue forecasting, realistic revenue projections and the financeable fiscal deficit need to be decided before the budget preparation procedure begins, not at some late stage just before or, worst of all, after its completion. Those preparing the budget need to ensure that the budget preparation timetable is sufficient, and the process transparent and comprehensive, so that there is no need for arbitrary expenditure cuts late in the process when revenue or borrowing constraints become clear.

Essentially, budgets are documents that express state governments' power to act. Because budgets have so many functions, the process of writing one is often conflict-ridden, unsatisfactory to observers and participants and flawed in its outcomes. The central function of a budget, the decision of how much to spend for what, will always create disputes, and no budget will ever satisfy everyone. Given the number and variety of interests and issues that have to be reconciled for a budget to be completed, the wonder is the ability of the process to move along smoothly year after year. For many observers, it is the competitiveness, compromises, and incomplete nature of the process that are striking and not the real accomplishment every annual budget represents.

Kenya’s budget making process is likely to be confronted with conflicting interests for some time. Extra patience will thus not be an option before the benefits of a public participative budget making process are fully realized. However, a strong legal and regulatory framework will truly provide a faster workable solution.

The writer is a tax expert with EY. Email: david.wanyoike@ke.ey.com 
Views expressed are not necessarily those of EY.