Ideas & Debate

What to expect after 2021 Budget

briefcase

Treasury Secretary Ukur Yatani holds up the briefcase containing the Budget for the 2021/22 financial year outside the National Treasury on June 11, 2021. FILE PHOTO | NMG

And so Treasury read the 2021/22 Budget Statement to Parliament. Forget the macro-fiscal numbers that we have already tortured to death, and think about the other big numbers we heard about.

Start with Sh20 billion to support job creation in manufacturing and Sh60 billion to enhance food and nutrition security for all Kenyans. Add Sh48 billion for universal health care and Sh14 billion for affordable housing. That gives us Sh142 billion for our big four priority agenda. Okay, toss in Sh23 billion for post-Covid economic recovery, even though the pandemic isn’t over yet (is a fourth, variant-led wave loading around our heightened super-spreader political activity?).

Then there was the big stuff. Like Sh93 billion for water and the environment and Sh103 billion towards vulnerable groups. And the mighty stuff, like Sh202 billion for education, Sh302 billion for security, and Sh311 billion for infrastructure. If you’re doing a running total, that is Sh1.2 trillion so far, which is about the same as the debt service number.

If we add Sh410 billion for counties, the resulting Sh2.6 trillion total is almost a trillion beyond the expected tax take, before we get to the rest of the government. No surprises then, that in describing this as a payback budget (debt service), Institute of Economic Affairs Kenya CEO Kwame Owino also warned that “we’re two years away from a crash” on TV last.

A colleague intriguingly suggests that these numbers are now so large, with changes in government activity so imperceptible, and “kwa-ground” impacts so invisible, that the only way this budget makes sense is if it’s a rollover budget, where Sh3.6 trillion is not just next year’s spending but includes years of unspent money rolled over (except the payroll). If we got the Auditor-General’s reports earlier, we could have tested this idea.

I also suspect it might help us better understand our pending bills problem. Now that Parliament is probably debating the budget they made but Treasury read as well as the appropriations bill that Treasury drafted, we have brand new drama. As reported in the Business Daily on Thursday, Treasury has seven days to respond to a petition filed in court by two “activists” (is this an actual word in our justice system?) seeking to have the budget quashed and declared unconstitutional.

Yes, the same Judiciary that has recently advised on the illegality and unconstitutionality of Parliament, and has ruled similarly on the occupation of office by some Cabinet Secretaries, all Chief Administrative Secretaries, many parastatal appointments, and the executive order that defines what is known as the machinery of government. Don’t forget the Building Bridges Initiative (BBI) too. Remember the phrase “may you live in interesting times”? Welcome to Kenya’s time-space continuum.

Let’s do another take on the budget. Once they were done with the usual analysis, our vibrant media devoted quite a bit of space this week to the role our Bretton Woods friends might have played in the budget. In different words, how the IMF and the World Bank might have helped the Treasury draft the budget which the constitution demands must be made by Parliament. I think that’s the wrong question.

The correct one should be — now that we’re on an IMF programme, with fresh support from the World Bank, what might fiscal 2021/22 look like? A snapshot of the respective programme documents sheds light on the results-led commitments we’re aiming for in return for a total package of Sh340 billion (Sh180 billion this year).

For the Bank, the list of performance indicators includes at least five ministries on the new e-government procurement platform that was only just announced in the budget, and compliance with the Public Investment Management regulations by 30 ongoing projects and for all new projects.

Add 100 percent cost recovery on retail electricity tariffs (up from 87 percent cost recovery today), termination or deferral of plans for 400 megawatts of new electricity generation capacity, and a more than 50 percent targeted reduction in electricity generated from fossil fuels (IPPs anyone?)

Throw in county climate change plans and land value maps, increased water and sanitation access, five times today’s number of poor and vulnerable households on government-financed health insurance, and that at least 30 percent of recurrent funding for universities must be performance-based.

Earlier, of course, we agreed on structural performance benchmarks with the IMF around stuff like restructuring 15 to 20 State-owned enterprises (parastatals), regular quarterly reporting on pending bills, the long-awaited audit on 2019/20 Covid-19 expenditures, comprehensive information on public procurement, and annual reporting on tax expenditures (reliefs, incentives, and giveaways).

Add a common IFMIS-linked payroll system across government and a complete stock-take of all public projects. As both institutions note, in the national government alone, we have 4,000 projects going on. From this technical perspective, fiscal 2021/22 looks like a year of reform as implementation proceeds apace.

We’ll probably also follow that court case for a while, then focus on what the government is buying for Sh3.6 trillion. At which point we will realise that fiscal 2021/22 is our pre-election year. Pre-election in Kenya and elsewhere equals minimum results and zero reform. We are living in interesting times!