Ideas & Debate

Unravelling the Budget allocations


The total budget is Sh3.2 trillion but government's total spending is Sh2.73 trillion. FILE PHOTO | NMG

Is it a Sh3.2 trillion or Sh2.73 trillion budget? That was the contention last week as various media houses ran the two conflicting figures, a debate that keeps recurring after every budget unveiling. Both figures are correct and depend on the context in which they are being used. The total budget is Sh3.2 trillion but government's total spending is Sh2.73 trillion. The difference of around Sh450 billion arises from debt redemptions, principal amounts of debts to be repaid, which the Treasury will roll over. So for accounting purposes, it’s advisable to use Sh2.73 trillion so as to balance financing of the budget against expenditure.

But in strict application of the Public Finance Management laws and regulation, debt redemption is spending because of the procedural design that comes on board in budgeting. All public debt obligations are under the Consolidated Fund Services, which are discretionary spending – obligations government must meet above other obligations, therefore, in law the budget is Sh3.2 trillion.

Now, media houses can choose to use any of the two figures but not the Parliamentary Budget Office which guides Parliament on the strict application of the Public Finance Laws during budgeting that stated the budget as Sh2.7 trillion as presented by the Treasury. Coming into the substantive issues in the Budget speech, allocation made to the Health sector was impressive at Sh111.7 billion - 4.2 percent of total spending, put together with Sh42.6 billion allocated to development of water and sewerage provides a good financial muscle to manage the headwinds of coronavirus pandemic.

But where the rubber meets the road is how that money will be spent in the fight against Covid-19. Almost half of the health budget, Sh50.3 billion, has been allocated for activities and programmes for the attainment of Universal Health Coverage by the drivers and enablers.

This is a huge allocation for the ministry to be silent on what policy plan government intends to implement here. Therefore, Parliament needs to thoroughly look into this budget item when the Appropriations Bill is presented.

Second issue after allocating close to Sh200 billion to health, water and sanitation should have been a robust safety protection programme. There is a deliberately misguided understanding of what a fiscal stimulus programme really is by government officials.

Tax reliefs and incentives together with VAT refunds and pending bills payment are not stimulus items. Tax relief is simply giving back money the government would have collected in taxes, while VAT refunds and pending bill payments are simply the government paying back money it owed people and businesses and repaying, so a debt payment cannot be classified as a bailout.

A fiscal stimulus means government injecting money directly to stabilise the economy. Let me use South Africa as an example.

The government intends to spend 4.5 percent of its GDP in its fiscal stimulus plan and half of that goes to job protection, wage guarantees, wage payments for small businesses unable to pay workers and protection of jobs.

In Kenya, at two percent of GDP, we are talking about a Sh200 billion as the safety protection programme for people and business. This amount looks huge but going through the Budget speech, a lot of money has been thrown around and one simply needs to re-allocate those budget items.

For example, why are we putting Sh10 billion into irrigation in the name of food security when we learned an unforgettable lesson with Galana Kulalu where we spent Sh14.5 billion and reaped only Sh30 million. Then allocate a paltry Sh500 million to Agricultural Finance Corporation, which provides inputs to farmers in form of loans. In fact, government should have considered providing farmers with inputs because agricultural farming is Kenya's biggest employers.

Lastly, looking at how Covid-19 has hit incomes, the government should have allocated a sizable share to the school feeding programme, which has been very effective in the fight against food and nutrition insecurity, but unfortunately this was missing.