FISCAL DISCIPLINE

Key to national budget management

In a nation of 45+ Million individuals, it is incumbent on the administration of the day to consider that the national budget both directly and indirectly affects the lives of every person in the country

In Summary

• A key focus area in relation to national budget management, particularly in the Kenyan context, is budget credibility

Acting Treasury CS Ukur Yatani.
Acting Treasury CS Ukur Yatani.
Image: FILE

Key to the success of public financial management is budget planning and management, which includes the preparation, execution and tracking of sustainable, efficient and accountable budget processes.

In a nation of 45+ Million individuals, it is incumbent on the administration of the day to consider that the national budget both directly and indirectly affects the lives of every person in the country, natural or otherwise, and therefore place utmost importance on ensuring that the budgeting process is efficient, transparent and accountable.

Three characteristics should appear at the core of any budgetary process – efficiency, transparency and accountability. This will in turn drive budgetary policies that enhance fiscal discipline, the effective allocation of resources and efficient public expenditure.

With respect to fiscal discipline, institutions tasked with management of a Country’s budget, such as the National Treasury with respect to Kenya, are mandated to ensure that budgetary allocations are sustainable over the short, medium and long term, and in turn promote economic stability.

Similarly, with respect to the effective allocation of resources, national budgetary institutions are required to ensure that public money is utilized in line with national priorities, in line with developmental targets that are tailored to achieve public policy objectives – for instance, the Big Four Agenda, Vision 2030 and the UN Sustainable Development Goals.

Third, and at the root of it all, is service delivery to the Mwananchi. Key public services such as healthcare and education should be prioritized and adequately funded to ensure that vital needs of the people are well catered for.

A key focus area in relation to national budget management, particularly in the Kenyan context, is budget credibility. Budget credibility refers to the ability of governments to accurately and consistently meet their expenditure and revenue targets.

It is imperative that planned budgets are adhered to, with spending priorities maintained, and proposed developmental agenda’s implemented. This requires strong and stable institutions that maintain spending priorities as budgeted for, control deficits within the optimal range, and ensure that critical public services are not compromised.

This will in turn increase public trust in the national budget management process, and ultimately governmental activities as a whole.

The above notwithstanding, it is expected that however well planned, potential changes in the larger macroeconomic environment may necessitate deviations from the initial budget.

As unexpected changes in the macroeconomic environment may not be easily predicted, it is necessary to ensure that enough flexibility is baked into the budgetary process to ensure that the national budget, while grounded in key objectives and policy targets, maintains a living character, that enables it adapt to present resource environment, while maintaining consistency with initial policy objectives.

This will ensure that any changes to the budget during the budget cycle do not disrupt critical governmental activities and policy objectives.

Karen Kandie – MD IDB Capital