The Government of Kenya recently, through the Treasury Cabinet secretary announced plans to adopt a zero-based budgeting (ZBB) technique for the 2025-26 financial year to streamline the management of public expenditure.
This decision came amid public scrutiny that put the government on the spot for potential misuse of national revenue through extravagant and unnecessary spending, while we have annual tax increments to fund the budget economic circumstances in subsequent years to the base year resulting in insufficient appropriations, unforeseen expenditures and unnecessary spending, which would have been prevented if actual budgets were made.
On this basis, there have been a lot of talks and proposals on the feasibility of adopting zero-based budgeting in Kenya’s budgeting process, with many arguments supporting the shift.
Zero-based budgeting is where all expenses must be justified for each financial period, starting from a ‘zero base’ based on their value and contribution to the economy.
Unlike traditional incremental budgeting, which typically adjusts previous budgets to account for new expenditures, ZBB requires that every proposed expenditure be analysed for its needs and costs.
ZBB offers unique benefits, key among them being promoting flexibility, transparency, accountability and responsibility in the allocation and use of public funds. The model allows for identifying priority and strategic goals to directly attribute funds towards achieving them while eliminating unnecessary expenditure.
Several countries including Canada, Norway, the US, South Africa, India, China and Mexico have explored this model. Canada has experimented with the model at various levels, especially during periods of fiscal constraint.
They have often been used in conjunction with programme budgeting to prioritise spending based on outcomes. Norway has also used the technique to prioritise spending and ensure efficient resource allocation, often combined with a focus on long-term sustainability and social equity.
Kenya also attempted to apply this model in the financial year 2018-19 budget process but faltered due to implementation challenges. Indeed, there are hurdles in fully adopting the ZBB model. One, the level of detailed analyses required by ZBB can be time-consuming and resource-intensive.
Two, implementing the model is quite complex, requiring input from several stakeholders in diverse industries and socio-economic fields to ensure that all priority expenditure is included in the budget.
These complexities birth oversight risks, with the potential of further increasing supplementary budget requests if proper planning is not done.
While the initial budget may be prepared using a zero-based approach, the subsequent introduction of supplementary budgets by the government could undermine this approach.
These challenges then give rise to the question, is Kenya ready for zero-based budgeting? This question is multifaceted and requires consideration of various factors. First is the current economic environment in Kenya.
While the country has experienced economic growth in the recent past, issues like budget deficit, rising public debt and revenue shortfalls continue to grip the economy.
On this basis alone, it is opined that the time is ripe to explore other budgeting options that, not only ensure that priority areas are accounted for but also do not strain Kenyans financially by national revenue demands. Institutional capacity is also another significant consideration.
Through proper planning and commitment, Kenya can adopt zero-based budgeting as a step towards more effective public financial management.
This is a welcome move that could reduce the financial strain on individuals and businesses caused by high taxation due to high revenue demands.
Do we have the resources required to implement ZBB, from skilled personnel, robust financial management systems, effective oversight mechanisms to availability of financial resources?
Again, do we have a strong government commitment? Implementing a ZBB model for a country required a strong commitment from the country’s leadership, grounded on the willingness to embrace transparency, accountability and efficiency in public spending.
Therefore, while ZBB looks promising based on its proven benefits, caution would recommend that we first take a step back and start implementation through pilot programmes at county level or in select ministries and departments to allow for testing and refinement of the process.
This will allow all stakeholders to identify potential gaps and deficiencies and find ways to mitigate them before expanding the model at the national level. This will also allow us to test whether each of the mentioned considerations have been adequately addressed.
Achieng is a tax manager and Kisiangani is an associate at EY Kenya