The theme of the Budget Policy Statement for 2016/17 has been revised to “Sustaining Prosperity in a Volatile Global Economy” from the previous draft theme of “Sustaining Economic Prosperity for all Kenyans”.
The reasons for emphasising the global economy are less clear from the revised BPS, with both the terms “volatile global/world” and “all Kenyans” appearing only three times in the entire contents of the policy paper.
In a 40,000 plus word document, none of these two phrases appears to carry sufficient thematic emphasis. Nevertheless, understanding how the money is shared is perhaps of more importance to the overall budget process than the theme.
The government plans to spend a total of Sh2.064 trillion in the Fiscal year 2016/17 with the county governments spending Sh280.4 billion, which is 14 per cent of the expenditure and the national government spending the balance of Sh1.783 trillion.
The budget does not specify how the county governments will spend their allocation because this will be specified in each county's budget, but it is expected to be within the provisions of the Financial Management Act 2012.
At the national level, Sh667.7 billion which is 37.43 per cent of the national government expenditure is allocated to development.
The allocation complies with the Financial Management Act 2012 that requires at least 30 per cent of the expenditure to goes to development.
The balance of Sh1.094 trillion which is 61.34 per cent, is recurrent expenditure. The development spend is marginally lower than the 2015/16 budget, where 41.5 per cent was dedicated to development.
With the emphasis on infrastructure, a much higher percentage needs to be allocated to development, at least more than in the current financial year which ends in June.
Within the recurrent expenditure of Sh1.094 trillion, ministerial recurrent costs take the bulk of the amount at Sh818.8 billion, which is 74.8 per cent.
The balance is interest and pension obligations which will cost Sh275.4 billion, which is 25.2 per cent of the total recurrent expenditure.
The interest and pension obligations amount has taken an upward trend from 20.9 per cent in the 2013/14 budget as a result of the increasing debt levels.
This budgetary component is obligatory in nature in that once contracted, the government has to pay it first before deciding what else to spend the balance on. Consequently, as it grows, more funds are diverted from other essential expenditures, hence the need to keep it in check.
Salaries and wages will cost Sh360.8 billion which is 20.23 per cent of the national government expenditure. This is marginally higher than the previous year, 2015/16, percentage of 18.41 per cent.
Salaries and wages component has been identified as one the areas in which to reduce the recurrent expenditure in order to release more funds for development and hence it would be expected to have a reduction, not an increase.
In sectorial expenditure, energy, infrastructure and ICT has the highest with Sh367.6 billion which is 25 per cent of the expenditure.
This is consistent with the policy objective to invest in infrastructure development in order to create a conducive business environment as outlined in pillar one of the transformation agenda. As expected, a large portion of this amount is on development, with a much smaller amount going to recurrent expenditure.
Second in priority expenditure is education, where Sh342 billion will be spent, which is 23 per cent of the total expenditure. The largest portion of the education expenditure goes to recurrent, at 90 per cent with only 10 per cent going to development.
While this may reflect the longstanding issue of improving the salaries of teachers, the need for more development expenditure especially on secondary education and vocational training needs is critical.
Going forward, a rational education budget needs to balance between the recurrent and development budget with at least 20 to 30 per cent of the expenditure in development.
Public administration and international relations has the third highest expenditure with Sh232.7 billion, which is 16 per cent of the total.
As outlined in the BPS, this is the sector mandated to provide overall policy, leadership and oversight in economic and devolution management to the country.
It also oversees national legislation, public service delivery, resource mobilisation and the implementation of the country’s foreign policy. The sector will spend almost similar amounts on development and recurrent expenditure.
Governance, justice, law and order takes fourth place in terms of expenditure with Sh182.5 billion which is 12 per cent of the total expenditure.
This is the sector responsible for security, coordination of national government, legal advice to government agencies and administration of justice.
It is notable that this is the sector that will be responsible for preparation and management of the 2017 elections, scale-up of the issuance of IDS, and regulation and funding of political parties.
The other identified sectors have spending of less than 10 per cent and include national security with Sh120.8 billion (eight per cent), Environmental protection, water and natural resources with Sh74.5 billion (five per cent), Health with Sh59.6 billion (four per cent), Agriculture, rural and urban development with Sh64 billion (four per cent), social protection, culture and recreation, Sh30 billion (two per cent) and lastly general economic and commercial affairs with Sh15.5 billion (one per cent).
The total expenditure budget of Sh2.064 trillion will be largely funded from local revenue collections that are estimated at Sh1.496 trillion which is 72 per cent utilisation of own means.
The balance of Sh567 billion will be funded through grants and borrowings, both locally and externally.