Post date: Wed, Oct 30, 2024
Category: Budget
By: Raphael Muya,

The Budget formulation and preparation process in Kenya is guided by a budget calendar which indicates the timelines for key activities issued in accordance with Section 36 of the Public Finance Management Act, 2012.These provide guidelines on the procedures for preparing the subsequent financial year and the Medium-Term budget forecasts. The Launch of the budget preparation process for the FY 2025/26 and the medium-term was done on 9^th September, 2024 at the Kenyatta International Convention Centre (KICC). The preparation, development and submission of these key budget documents for approval by the cabinet and parliament is very important at the formulation stage of the budget process.

To support prompt finalization and approval of major budget policy documents, Ministries, Departments, and Agencies (MDAs) are required to strictly adhere to the timelines outlined in the budget calendar. The FY 2025/26 Medium-Term Budget Calendar is designed to ensure timely submission and approval of key budget documents and requirements, as noted on the Treasury website. To guarantee these timelines are met, the table below outlines how the calendar will be used in the FY 2025/26 budget planning process.

Public Participation

Sector Working Groups (SWGs) foster countrywide stakeholder participation in Kenya’s medium-term budget process. As a recognized channel for resource allocation, SWGs are responsible for creating and prioritizing sector budget proposals, forming a vital avenue for Kenyan citizens and interest groups to engage in budget preparation.

The IEA-Kenya, through annual pre-budget forums, provides a complementary platform to deepen public participation in the budget process. In these hearings, diverse groups and individuals from the corporate and non-profit sectors present proposals on expenditures, regulations, and tax policies, which are consolidated into a Citizen’s Alternative Budget proposal. The timeframe for submitting these views for FY 2025/26 runs from November 2024 through February 2025.

Pending Bills

Table 2.0 shows the breakdown of the government of Kenya pending bills from the national government, State Owned Enterprises (SoEs) and county governments for the end of Q4 of FY 2023/24 compared with the same period in FY 2022/23. Of the three entities, the largest share of pending bills, 54% is held by SoEs with Ministries Departments and Agencies (MDAs) holding 19% and the county government with 26%.  Therefore, the outstanding total pending bills for both the national and county government was Ksh 697.85 billion down from Ksh 727.74 billion, representing a reduction of 4.2%.

Table 2.0 shows that majority of pending bills are by SoEs which include payments owed to contractors and suppliers while the remainder represent arrears in satisfying statutory commitments such as pensions. National MDAs’ pending invoices are historical with the majority of them being for recurrent expenses. The increased pending bills can be attributed to a variety of issues, including cash flow management challenges and deficiencies throughout budget execution phases. Overally, pending bill continue to put pressure on the scarce resources with some of these bills attracting penalties, thereby putting more strain on the available resources.

Another observation from table 2.0 is payment of pending bills at the county level. More pending bills were paid in the FY 2023/2024 for development expenditure compared to the recurrent expenditure and was vice versa for the year 2022/2023.This is a suggestion that more defaults were on staff deduction attributed to late disbursement of funds the national treasury to the counties.

The National Treasury and Economic Planning through the Cabinet Secretary appointed a pending bill verification committee which is supposed to carry out a thorough analysis of the stock of pending bills that have accumulated from June 2005 to June 2022. The action aims to ensure the integrity of the bills while also protecting and cushioning small businesses from liquidity shortages as well as formulate measures to stop accumulation of pending bills by the National and County governments.

The Committee is expected to complete its work and submit a report by October 2024 in which this report will inform the measures to be undertaken within the fiscal framework. Reports from the Office of the Controller f Budget (CoB) indicates that the pending bills for MDA’s are historical with majority related to recurrent expenditure. In addition, the rising pending bills create a challenge in cash flow management and during budget execution phases. Prioritization and efforts in clearing pending bills for the national government is critical owing to liquidity risk it poses for private sector and businesses. The Controller of Budget (CoB) and National Treasury (NT) have called for MDAs and County governments to prioritize payment of pending bills as a first charge during the budget implementations.

Conclusion

It is therefore vital for Kenyans to have an awareness of the issues to be on the lookout during the budget formulation in the FY 2025/2026 as indicated in Table 1.0 and matter concerning the reports from the Pending Bills Verification Committee. Kenya’s Budget formulation process is guided by rigorous legislative timelines, and citizens who wish to participate need to be aware of and it is anticipated that they adhere to the calendar and discuss any policy-related concerns.

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