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Ideas & Debate

We need to promote equity in the budgeting process

Last week I attended an event organised by International Budget Partnership (IBP) Kenya that analysed whether National and County budgets share resources fairly.

IBP made the point that one of the key drivers of constitutional reform was to enhance the fair distribution of resources in the pursuit of equity.

IBP defines equity and fairness in the context of budget as constituting six principles: need based on the idea that people who need more should get more; capacity considers the extent to which a person/population can meet their own need; effort is rooted in the idea that people deserve more when they make more of an effort; efficiency that argues that resources should be allocated where they will be used most effectively to increase total welfare; basic minimum principle that everyone deserves at least some minimal share of resources; and finally, fair process where resource allocation outcomes are decided in an open and transparent way and justifications are given for decisions.

These principles are by no means exhaustive and do not include elements such as fiscal responsibility. However IBP’s analysis of county budgets with these principles in mind revealed glaring problems.

First of all, budgets in Kenya are dominated by the notion of equal share. In the case of  the Constituency Development Fund (CDF) in which Sh35.2 billion were dispersed in 2015/16, some 75 per cent of the fund is shared equally among the 290 constituencies and only 25 per cent is distributed based on the proportion of all poor people in Kenya that reside in a particular constituency.

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The massive portion in equal share is fundamentally problematic because the current CDF provides each geographical unit with a similar amount regardless of the size of the population in the constituency.

So in densely populated areas, much less is received per person (per capita allocation) than in sparsely populated areas.

An example is Kitutu Masaba and Mwatate which both have a poverty rate of 50 per cent, yet there are three times as many poor people living in Kitutu Masaba than in Mwatate.

Even in cases where proportions are used, problems emerge. Allocations are made to Level 5 hospitals, which have a regional catchment area and serve as referral hospitals for more than one county, yet are managed by individual host counties. So a conditional grant was introduced to finance Level 5 hospitals.

According to IBP, in 2015/16 the single criterion for allocating the grant among the 11 hospitals was the bed occupancy rate.

The concern is that given the wide variation in the actual number of beds in each facility, using bed occupancy rates introduces a distortion.

For example, both Meru and Nakuru had occupancy rates of 77 per cent so both were allocated Sh356 million. Yet Meru has 306 beds and Nakuru, almost double this at 588 beds.

Finally the issue of process in budget allocation, particularly at county government level, is worrying. Political power and considerations routinely trump the fair distribution of resources at county level.

In some cases, county cabinet secretaries skew allocations towards their village areas at sub -county level. Thus communities with no representative in county level cabinets are financially marginalised.

In some counties, budget allocations are based on the lists of projects drawn up by Members of County Assemblies (MCAs). How those projects were chosen, why they were chosen, whether they are in line with County Development Plans is not clear.

And allocating funds based on MCA lists facilitates nepotism and fiscal indiscipline. Further, presently at county level, little or no justifications are made as to why resources have been allocated as they have been.

Clearly there are fundamental problems with how public funds are allocated in Kenya.

A key step that would make budget making a tool that facilitates equitable development is to reduce the amount allocated in equal share and rather base most allocations on well thought through weighted criteria.

Further, given the mismanagement of funds especially at county level, the principle of fiscal discipline should carry considerable weight and reward demonstrated responsible use of resources.

Ms Were is a development economist [email protected]

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