What to Expect from the Budget Planning Process for the Coming Year

The Ministry of Finance and Economic Planning (National Treasury) has released a Budget Circular to all its Ministries, Departments, and Agencies (MDAs). The circular also goes to all Constitutional Commissions, Independent Offices, Parliament, and the Judiciary.

The National Treasury releases the circular in line with Section 36 of the Public Finance Management Act, 2012. The budget circular provides guidelines on the processes and procedures for preparing the 2019/2020-2021/2022 medium term budget.  The guidelines apply to all the entities mentioned above.

The Treasury should release the circular by 30th August in accordance with the budget process in Kenya.

The purpose of the circular is to guide MDAs in the:

  • policy framework supporting the medium term budget for 2019/20-2021/22 (3 years),
  • constitutional timelines and requirements for key activities in the budget preparation process,
  • institutional structures to guide the budget process,
  • programme performance reviews,
  • prioritization process for programmes,
  • form and content of budget, and the costing of programmes, and
  • framework for public participation in the budget process.

A financial year (FY) in Kenya begins in 1st July of the current year and ends in 30th June of the coming year. It is the period the government uses for budgeting and accounting purposes, and for financial reporting.

A link to download the circular is available at the end of this article. You will need it also because of the references made in certain sections of the circular in this article.

Highlights of the budget circular

The Guidelines

(i) Medium Term Development Strategy

In preparing the 2019/20-2021/22 Medium Term Expenditure Framework (MTEF) budget, the MDAs will have to prioritize allocations towards achieving the ‘Big Four’ Plan. The government initiated the implementation of the ‘Big Four’ in the current financial year 2018/19. The allocations are supposed to support the following interventions:

  • enhancing food and nutrition security to all Kenyans – with the objective being to achieve food security and improved nutrition for all citizens by 2022.
  • providing universal healthcare coverage and guaranteeing quality and affordable healthcare to all Kenyans – with the relevant MDAs expected to implement identified interventions with the objective of expanding universal healthcare coverage.
  • provision of affordable and decent housing for all Kenyans – to meet the government intention to provide decent and affordable housing by constructing at least 5000 housing units by 2022.
  • supporting value addition and raising the manufacturing sector share of GDP to 15% by 2022.

(ii) Key Dates in the Budget Preparation Process

The budget process involves preparation of key documents for approval by the Cabinet and Parliament. To finalize the budget and submit it for approval, MDAs will have to undertake certain activities.

The key activities are in the Budget Calendar for the FY 2019/20 which you can find in Annex 1 of the budget circular.

Accounting officers are required to note the timelines and initiate action as required to ensure that the budget is prepared and submitted to Parliament as scheduled.

The public should also note this Annex in particular so as not to miss out on public participation in the budget process.

(iii) Sector Working Groups

MDAs are organized into sectors. This classification allows sector wide approach to planning and budgeting. It also allows international comparison of similar programmes and services across countries.

The government has mapped its functions into ten sectors, namely:

  • Agriculture, Rural, and Urban Development (ARUD);
  • Energy, Infrastructure, and ICT;
  • General Economic, and Commercial Affairs;
  • Health;
  • Education;
  • Governance, Justice, Law, and Order(GJLO),
  • Public Administration and International Relations;
  • National Security;
  • Social Protection, Culture, and Recreation; and
  • Environmental Protection, Water, and Natural Resources.

Annex 2 of the circular maps the MDAs into Sectors. Respective Sector Working Groups (SWGs) that shall formulate and prioritize sector budget proposals. The structure and composition of the SWGs is under Annex 3(A) and terms of reference are under Annex 3(B).

(iv) Programme Performance Reviews 

Programme performance Reviews (PPRs) are important for effective programme-performance budgeting. Accounting officers should initiate action for their MDAs to carry out PPRs in line with the guidelines.

In undertaking PPRs, MDAs should do a detailed assessment of the progress achieved in realizing the targeted outputs after implementation of the MTEFs for 2015/16-2017-18. The assessment should entail analysing the previous budget allocations, actual expenditure, and achievement of actual outputs.

The PPRs should indicate both financial and non-financial indicators of performance for each programme. The report should provide progress of both domestically and externally financed projects within a programme.

More so, the review should focus on efficiency and effectiveness towards achieving the programme outcomes. Experiences and lessons from the review should form the basis for guiding expenditure allocations in the Medium-Term Budget.

The guidelines and formats to carry out PPR are in Annex 4 of the circular. Accounting officers for MDAs need to finalize their PPR to bid for resources in their respective sectors.

(v) Prioritisation and Allocation of Resources

The following criteria will serve as a guide for allocating resources by the government:

  • linkage of programmes to the ‘Big Four’ Plan as drivers or enablers,
  • linkage of the programme with the objectives of the Third Medium-Term Plan of Vision 2030,
  • degree to which a programme addresses job creation and poverty reduction,
  • degree to which the programme is addressing the core mandate of the MDAs,
  • expected output and outcomes from a programme,
  • cost effectiveness and sustainability of the programme; and
  • immediate response to the requirements and promotion of the implementation of the Constitution.

Based on the broad guidelines, each sector is expected to develop and document criteria for resource allocation and undertake a prioritization exercise. SWGs should review critically their proposals and explore how they are accommodated within the sector ceilings (maximum allocation for the sector).

For more of these guidelines and other information, download the  Guidelines for Preparing the Medium Term Budget for the Period 2019/20-2021/22 (10 downloads) .

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George Githinji
George Githinji
Githinji is passionate about devolved governance and public finance. He also comments on topical issues in Kenyan politics and society. In addition, he manages the @UgatuziKenya platform.

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