The Annual National Government Budget Implementation Review Report (BIRR) for the Financial Year (FY) 2016/17 is out. This report by the Controller of Budget presents the aggregate performance of budget implementation by Ministries, Departments, and Agencies (MDAs) of the National Government.
The report covers the twelve months starting in 1st July 2016 and ending in 30th June 2017.
The Controller of Budget prepares the report in line with Article 228 (6) of the Constitution of Kenya, 2010 and Section 9 of the Controller of Budget Act, 2016.
Both laws require the Controller of Budget (COB) to submit to each House of Parliament a report on the implementation of the budgets of National and County government every four months.
The report presents the performance of revenue and expenditure for the National Government MDAs. It also highlights the key challenges the National Government entities encountered during budget execution.
For the counties, see How the County Governments Spent Your Money in the FY 2016/17.
Anticipations and commitments
The Government through the FY 2016/17 Budget Policy Statement (BPS) had anticipated sustained economic growth. The key features of the National Government Budget for FY 2016/17 were to:
- improve the business environment by improving security,
- maintaining macro-economic stability, and
- reducing the cost of doing business to encourage investment opportunities in the Country.
The Government had committed to continue spending on infrastructure to unlock constraints to growth. It also committed to continue spending on all sectors to create employment. In addition, the Government had planned to sustain investment in social services for the welfare of Kenyans by:
- investing in quality and accessible health care services and education, and
- strengthening the social safety nets.
Similarly, the Government committed to enhance service delivery through devolution. It hoped to achieve this by consolidating the gains already made in the devolved units. The aim was to provide better service delivery to the citizenry. The foregoing:
- shaped the budget programmes and projects, and
- formed the basis for the MDAs budget implementation review by the Office of the Controller of Budget.
Overview of budget implementation
Budget implementation in the FY 2016/17 recorded commendable improvement.
The overall budget was KSh2.6 trillion up from KSh2.3 trillion in FY 2015/16, representing a 15 per cent increase.
This resulted to an increase in allocation for recurrent expenditure (KSh1.5 trillion), development expenditure (KSh861.2 billion), and county governments allocation (KSh300.1 billion).
These were the highest budgetary allocations between FY 2012/13 to FY 2016/17.
Revenue raised in FY 2016/17
In FY 2016/17, exchequer revenue raised by the Government through the National Treasury was KSh2.03 trillion. It represents 96.9 per cent of the revised annual target of KSh2.1 trillion.
This was 9.4 per cent improvement in relation to KSh1.9 trillion in exchequer revenue for FY 2015/16.
Exchequer Revenue includes:
- Tax Income,
- Net Domestic Borrowing,
- Commercial Loans,
- Opening balances from Previous year,
- Non-Tax Income,
- Loans- Foreign Governments & International Organizations,
- Unspent balances recovered from MDAs,
- Grants-Foreign Governments & International Organizations,
- Grants from AMISOM,
- Program Loan- Budget Support,
- Domestic Lending and On-Lending, etc.
The Tax Income, Domestic Borrowing and Commercial Loans categories contributed KSh1.25 trillion, KSh415 billion and KSh186.3 billion respectively.
Grants from International Organizations and AMISOM contributed KSh13.4 billion.
Total exchequer issues (money disbursed to government MDAs)
The total exchequer issues to MDAs, Consolidated Fund Services (CFS), and County Governments in FY 2016/17 amounted to KSh2.0 trillion. This represents 95.4 per cent of the revised annual net estimates. It was an increase from KSh1.79 trillion available for the MDAs in FY 2015/16.
The exchequer issues for recurrent activities were KSh819.9 billion. KSh394.2 billion went towards development activities.
Another KSh498.1 billion went towards Consolidated Fund Services (CFS, comprising of public debt repayments, pensions and gratuities, subscriptions to international organizations, etc.).
County Governments received KSh284.7 billion.
Total expenditure by MDAs
The total expenditure by the National Government was KSh1.96 trillion. It represents 84.7 per cent of the revised gross estimates.
The total expenditure comprised of recurrent expenditure at KSh1.36 trillion and KSh602.3 billion for development expenditure. This represents 93.4 per cent and 69.9 per cent of the revised gross estimates respectively.
Recurrent expenditure comprised of KSh858.3 billion towards MDAs recurrent activities and KSh499 billion for CFS. This represents 14.8 per cent growth from KSh1.18 trillion (90.5 per cent) recorded in FY 2015/16.
Analysis of the MDAs recurrent expenditure shows that, a total of KSh341.4 billion was current transfers to Semi-Autonomous Government Agencies (SAGAs) which represented 39.8 per cent of the total recurrent expenditure.
The second highest expenditure category was Personnel Emoluments (salaries, allowances, etc.) at KSh329.8 billion. This represents 38.4 per cent of the total recurrent expenditure by MDAs.
Further analysis of the Personnel Emoluments (PE) shows that the Teachers Service Commission (TSC) recorded the highest expenditure at KSh189.6 billion. The amount translated to 57.5 per cent of the total PE expenditure by all MDAs. This is due to teachers’ salaries, which constitutes the bulk of the recurrent expenditure under TSC.
Domestic and Foreign Travel was the third highest recurrent spending category at KSh15.6 billion. The national government spent KSh9.5 billion for domestic travel and KSh6.1 billion for foreign travel.
The gross development expenditure amounted to KSh602.3 billion. It represents an absorption rate of 69.9 per cent. This is a marginal increase from 66.3 per cent from the previous financial year.
Absorption rate is the percentage of total expenditure to the Approved Budget.
Capital Transfers (development funds) to SAGAs was the highest spending economic category at KSh297.7 billion. Refurbishment of Buildings and Infrastructure recorded KSh114.2 billion. Both represent 49.4 per cent and 19 per cent of the revised gross development expenditure respectively.
Challenges and recommendations
During FY 2016/17, budget implementation faced a number of challenges. These included:
- delay in submission of quarterly financial performance reports by MDAs to the Office of the Controller of Budget, and
- budget rationalisation through the supplementary budget leading to inadequate resources to MDAs to implement planned activities.
The Office of the Controller of Budget (OCOB) recommends timely submission of financial reports to enhance budget monitoring and reporting. Whenever, there are budget revisions, the National Treasury should discuss with the respective MDAs to allow for prioritization of activities for effective implementation of the budget.
For more about how the national government spent its budget in the financial year 2016/17, get The Annual National Government Budget Implementation Report FY 2016/17 (39 downloads)