Opinion & Analysis

New law will streamline fiscal policies

President Kibaki addresses a Yes campaign rally at the 64 stadium, Eldoret on July 16, 2010. The proposed constitution of Kenya seeks to present an improved governance structure that is reflective of the growth and development of the nation to date. Photo/PPS
President Kibaki addresses a Yes campaign rally at the 64 stadium, Eldoret on July 16, 2010. The proposed constitution of Kenya seeks to present an improved governance structure that is reflective of the growth and development of the nation to date. Photo/PPS 

The vagaries of public expenditure in the developing world have led to a bloated capacity of financial management that over the decades has been characterised by budget deficits, massive public debts and deficit financing.

Kenya just like other developing countries assumes the role of a facilitator of development, fiscal policies and administration and in return it is expected this will lead to stability, development, self-reliance, reduction of inequalities income and wealth and balanced regional development arithmetic.

The Government has a single twin responsibility of resource mobilisation and resource allocation.

In a functional state, resource mobilization is done through revenue collection that includes levying of taxes and borrowing.

Whereas this is more or less a standard operational process, the allocation and utilisation of resources in any society is more often than not a site of both contestation and competition.

Basic state functions for which it must raise resources for is the provision of services to its citizens that consist of security, social infrastructure development (education, health, water and sewerage, roads etc.) in the end result; it is the mobilization and allocation that underlines the basic relationship between the citizen and the state.

The constitution being the supreme law of the land that codifies and defines the principles of the social contract and nature of governance in every state, it explicitly lays out the principles of resource mobilisation and equitable allocation.

The proposed constitution of Kenya seeks to present an improved governance structure that is reflective of the growth and development of the nation to date.

It aspires to bring on board a more representative social contract that captures the national desire for a more representative, equal, fair and dignified social order.

Most of the proposed articles reflect the desire to institutionalise the principles of fiscal transparency.

It introduces an entire section on guiding principles of finance management that espouse the values of openness and accountability, equity and prudence in management of public resources.

The proposed law provides for equitable sharing of the national revenue between the national and county governments as well as special attention to marginalised areas through the equalisation fund geared at improving basic services such as provision of water, electricity, roads and health facilities.

Under the new constitutional dispensation, new laws will be enacted to guide borrowing by the National Government with approval of the legislature.

The new law will compel the Finance Secretary to report to both the Senate and Legislature within a period of seven (7) days of their request on whom to borrow from, conditionalities and the purpose of the loan.

Counties will also be allowed to borrow but only if approved by the county assembly and the national government agrees to be the guarantor.

A law will be enacted to guide this process.

Orwochi is a researcher with Kenya Debt Relief Network.