INSTITUTE OF PUBLIC FINANCE KENYA LAUNCHES THE SECOND EDITION OF THE NATIONAL ANNUAL SHADOW BUDGET REPORT FOR 2022/23

The Institute of Public Finance Kenya (IPFK) has launched the second edition of the National Annual Shadow Budget by IPFK™ for the 2022/23 financial year (FY). This report seeks to support engagement between the state and non-state actors in the budget process, enhance access to budget information, particularly on revenue and public expenditure performance, public debt contracting as well as servicing.  It mirrors the actual budget and gives proposed recommendations on what the National Government should implement in the 2022/23 FY budget.

The shadow budget comes at an opportune moment, ahead of the conclusion of the approval stage of the budget process set to take place in April 2022 due to the accelerated budget calendar.  Its report highlights the inability of the government to implement the fiscal consolidation plan, which has been deferred now for the second time. Speaking during the launch, IPFK’s Chief Executive Officer, Mr James Muraguri, pointed out that Kenya’s risk to debt distress remains high with the government sending more than half of taxes collected on debt service repayments.

From this report, a sector drill-down shows that the health sector’s budget increased in nominal terms by 42% between FY 2018/19 and FY 2020/21. The increase is larger for the development budget which constituted 44% in FY 2020/21 up from 38% in FY 2018/19. Execution of the development budget remains low, averaging 81% for the three-year period, compared to the recurrent one which is at 94% for the same period.

The Institute’s head of research, John Nyangi, also spoke on why the government should increase substantial spending in the health sector to achieve universal health coverage (UHC). He observed: “Adequate resourcing to the health sector is advocated for. However, there is an immediate need to fast-track NHIF reforms to ensure efficiency and equity in the use and distribution of resources. In addition, there is an increased need for government support in social protection, culture and recreation (SPCR) sector to cater for the vulnerable population which includes people with disability, the elderly and orphans. The report indicates that over  two  million people have been pushed into poverty due to the impact of Covid -19 ,  and  two  more million affected by the ongoing drought in the Northern counties.”

Across the departments, a shift of focus is noted in the agriculture, rural and urban development (ARUD) sector through a 34 per cent increase in budget allocation to the State Department for Cooperatives, while a 21 per cent budget cut is expected at the State Department for Crops Development and Agricultural Research in the FY 2022/23. Economic analysis as contained in the Shadow Budget Report recommends that the National Treasury must act and remain committed to the path for fiscal consolidation to avert an economic catastrophe. Failure to stay on the lean budgetary consolidation path, the shadow budget reveals, will leave the country in a precarious position, necessitating heavy taxation and an increase in public debt to meet fiscal obligations.

Mr Muraguri notes that ”the Kenyan economy enters 2022 already in a weaker position as it is still recovering from the adverse economic impact caused by the pandemic. Another unique aspect of 2022 is the upcoming general election that is likely to disrupt the economic recovery. Additionally, Kenya’s inflation rate which has been on the rise in the recent past due to the weakening Kenya Shilling may likely increase the cost of living,” Mr. Muraguri further noted.  The National Treasury should therefore devise strategies to cushion the citizens from these adverse effects.