Breaking down the 2021/22 Kenyan budget

Kenya's cabinet treasurer is gearing up to present the country's largest budget yet, sparking speculation and concerns regarding the budget inputs. In a recent interview on CNBC Africa, Ogutu Churchill, the Head of Research at Genghis Capital, shed light on the various aspects of the budget and the challenges it poses. The budget is set at a staggering 3.6 trillion Kenyan shillings, with significant allocations to the national government amounting to approximately 1.8 trillion shillings. This allocation is slightly lower than the initial target set in the budget statement, which was around 1.97 trillion shillings. The spotlight, however, falls on the consolidated fund services, a crucial component of the budget that encompasses public debt service costs, salaries, and pensions. The consolidated fund services have surged to 1.3 trillion shillings, indicating a substantial increase in the upcoming financial year. Churchill emphasized that these figures are estimates from the treasury and are non-negotiable, presenting a challenge for any potential interventions from parliament. The lack of flexibility in adjusting the consolidated fund services has led to ballooning budgets and intensified scrutiny from stakeholders. Furthermore, the revelation of a hidden 600 billion Kenyan shillings within the budget raised eyebrows and sparked controversy among assembly members. Churchill attributed this hidden allocation to the consolidated fund services, highlighting the limited oversight capacity of the national assembly in managing these critical costs. The lack of authority to alter public debt service expenses and civil service salaries has fueled dissatisfaction and skepticism among assembly members. Despite the mounting pressure and concerns surrounding the budget, Churchill expressed doubts regarding the possibility of the parliament vetoing the budget, citing the limited leverage of lawmakers in influencing expenditure patterns. He suggested that minor adjustments might be made through public participation and lobbying efforts within the budget committee. Churchill noted that the treasury had made efforts to rationalize the budget estimates, reducing the national government allocation from 1.97 trillion to 1.88 trillion shillings. However, he underscored the need for parliamentarians to scrutinize the budget further and align it with realistic spending levels. One key issue pertained to the allocation of funds to priority sectors identified by the government, such as the economic recovery strategy to mitigate the impacts of COVID-19. Despite the government's rhetoric on prioritizing certain sectors, the allocation of resources did not reflect a significant commitment to these areas, raising concerns about the efficacy of the budget allocations. The prevailing fiscal deficit and discrepancies in spending patterns underscored the challenges facing Kenya's budget landscape, necessitating a reevaluation of budget priorities and allocations. Churchill acknowledged the potential inclusion of the Building Back Better (BBB) spending in a supplementary budget later in the year, pointing to the upcoming referendum and general elections as potential triggers for additional budgetary interventions. As Kenya braces for significant financial decisions in the coming months, the scrutiny on budget inputs and expenditure allocations remains pivotal for economic stability and growth.