Public Finance and Performance Challenges in Kenya

Published  in the East African by John Lakin 9th June 2012

On May 20, Business Daily ran a story entitled, “State agencies fail to spend budget billions as year closes.” The article referenced a budget execution report produced by the Office of the Controller of Budget in Kenya.

Before we talk about the article, let’s talk about the report.  Actually, the report, like the website of the Office of the Controller of Budget, is invisible. It has been made available to some key actors and media houses, but not to the public. Although the Controller is a public office reporting on the use of public money, the public is apparently not allowed to read and analyse this information directly, without the filter of the media.

We are supposed to be in a new dispensation in Kenya. The Constitution (Article 201) tells us that, in this new dispensation, public finances will be managed in accordance with principles of openness, accountability and public participation.

What has happened so far in this new dispensation? Last year, Treasury presented the budget estimates a month late to parliament. This year, they were presented on time, but it is now June and they are still not available to the public. The Budget Policy Statement, on the other hand, was presented late to parliament and posted even later online for public consumption. The Supplementary Budget from last year is available to the public at a cost of over $40, but is not online.

And now this: The budget execution reports are not available to the public. The Controller does not even have a website.
Somehow, it doesn’t feel like a new dispensation.

The new dispensation must be operationalised by a revised Public Financial Management Bill, and such a Bill is now in parliament for review. But this Bill, in its current form, does not guarantee that the public will have access to the Budget Policy Statement before parliament reviews and approves it. Nor does it guarantee the public access to the Budget Estimates before those are approved by parliament.

The problems run deeper, though. Even when information is made available, it is often incomprehensible or confusing. Many Treasury documents consist entirely of tables with no narrative, for example, making them difficult to comprehend. The PFM Bill does nothing to make budget documents user-friendly to the wider public.

Now, let us return to the Controller’s report. The headline figure is that the physical infrastructure sector has spent less than 40 per cent of its total budget through the third quarter. I am not sure what the physical infrastructure “sector” is: Treasury has defined nine sectors for the Medium Term Expenditure Framework, but there seem to be 10 sectors here, and they have somewhat different names.

Nevertheless, infrastructure is the worst performing of the 10 sectors reported. Moreover, the Ministry of Transport has spent less than 30 per cent of its budget through the third quarter.

Legacy

This comes as a surprise: The Kibaki administration has touted infrastructure as a key legacy, yet the government is not able to execute the budget it receives. It might be useful to know where specifically the bottlenecks are in the infrastructure sector, but of course, to know that, we would need to see a full report from the Controller.

It is also surprising that the Ministry of Water ranks as a poor performer, given that Kenya lags behind in achieving Millennium Development Goal 7, particularly those targets related to access to clean water and basic sanitation. According to 2008/2009 data, only 63 per cent of Kenyans have access to clean water.

A final surprise in this data is that the Ministry of Planning is one of the worst performers at the ministry level. By the end of the third quarter, Planning had spent less than 7 per cent of its budget. That is shocking in and of itself, but what is inconceivable is that the Ministry of Planning was ranked the top performer in the government’s performance contract rankings only months ago. How can a government agency that does not spend any money be a top performer?

To be fair, the performance ranking was from the previous fiscal year, but it is still hard to comprehend how a top-performing agency in one fiscal year is ranked second from the bottom in budget execution in the next fiscal year. Do institutions really radically change their performance capacity in such a short time? Or is there something fishy about the way the performance data is gathered?

The release of the Controller’s report is a nice metaphor for the degree of public access to financial information in Kenya today. Government does not make public key financial information. And when it does release information, it is often in a form that breeds as much confusion as understanding. Welcome to the new dispensation: looks a lot like the old dispensation.

Public expenditure notes here,

Here

Here

Here

Public goods theory

Growth and public expenditure

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