Explainer: The budget making process in Kenya

Crafting a national budget involves meticulous planning, extensive public consultation, and oversight. [Standard, File]

The formulation of a financial budget starts months before the actual reading is done in June each year by the cabinet secretary of National Treasury.

The budget making process is guided by the 2010 Constitution and the Public Finance Management Act of 2012. The first stage starts on August 30, and ends on April 30.

The four major stages are: formulation, approval and allocation, implementation and auditing.

Here is a step by step guide on how a budget is formulated;

Stage 1: Formulation

On August 30th, Treasury issues the budget circular which provides guidelines on the budget process to all national government entities.

The circular includes a schedule for the budget preparation including key dates, procedures for the review and projection of revenues and expenditures and procedures for public participation.

Keep Reading

Stage 2: Approval and allocation

On September 30th, the Treasury submits the Budget Review and Outlook Paper (Brop) to the Cabinet for approval. Brop shows the fiscal performance in the previous financial year and compares it to the budget appropriation for that year.

Stage 3: Implementation

The Treasury Cabinet Secretary prepares a final draft Budget Policy Statement (BPS) outlining measures to raise revenue and spending priorities which is then presented to the Parliament. The budget estimates are also relayed to the public to allow citizens input.

In January, the Budget and Appropriations Committee of the National Assembly then reviews and discusses the budget estimates. The (BPS) is later sent back to Treasury with recommendations.

The National Assembly has the power to amend the laws and decide if they should pass or not. Once approved by the National Assembly, the Treasury prepares an Appropriation Bill for the approved budget.

The implementation is overseen by The Office of Controller of Budget of Kenya. It takes twelve months for the budget to be implemented.

Stage 4: Auditing

The budget is implemented throughout the fiscal year during which the process is monitored by the National Treasury. Quarterly reports are produced to show how the process is proceeding.

The last process is auditing which is conducted to ensure proper use of funds. It takes six months before it is concluded.

Experts say:

There are two common ways of budgeting that is; zero-based budgeting and incremental budgeting.

Zero-based is where expenses are justified for a new period. Here, the budgeting starts from zero every year. On the other hand, incremental budgeting refers to making amendments to the previous year’s budget by either subtracting or adding what had been allocated based on the economic policies. Kenya uses incremental budgeting.

“When it gets to June [budget reading], a lot of government entities know the fiscal year is ending, hence, most rush to spend the remaining budget because if they don't, their allocation will be reduced in the next year,” says Ken Gichinga, an economist.

The government, Gichinga says, should align its budget to its manifesto to avoid a disconnect during policy making.

“The right way to do it is to reflect on the manifesto, see what was promised to Kenyans, then take key nuggets and translate it to the budget. In this case, we ask ourselves if the budget reflects on the bottom-up economic model. Right now, there's a disconnect between what was campaigned and what is implemented,” he added.

John Juma, Senior Research Analyst, Institute of Public Finance expresses the importance of public participation in the budget making process.

“Increasingly, we are seeing the need for citizens to take up an active role at all crucial stages of this process, the government must be held accountable so that taxpayers can be sure that their money is utilized in the right way,” says Juma.

Solomon Kihanga, Senior Manager Tax and Regulatory Services KPMG Kenya emphasizes the importance of the process.

“The budget process is crucial because it has a way of influencing all spheres of our lives, from politics to policies. It helps guide in resource mobilization and allocation and hence an important process in governance,”