Beyond debts and deficits: Will budget 202526 chart a new path?

Treasury CS John Mbadi before the Senate's Finance Committee to deliberate on matters of 2025 Budget Policy Statement and also to Consider the Public Finance Management (Amendment) Bill (National Assembly Bills No. 45 of 2025 ) at County Hall, Parliament, Nairobi. March 18th,2025 (Elvis Ogina, Standard) Finally, Kenyans have a chance to peruse, examine and otherwise study the 2025 Finance Bill; published in the week in which the BBC's Blood Parliament documentary reminded us of the 2024 Finance Bill protests. The National Treasury and now Parliament are engaging with citizens, while the Cabinet dispatch preceding the Bill's release spoke to "closing loopholes and enhancing efficiency...while seeking to minimize tax-raising measures". Will this year's public participation and media engagement get us a proper debate on "winners and losers" in each tax change? Let's park the Finance Bill for another day, and consider the wider context for Budget 2025. A starting point might be the contemporary official view that Kenyans celebrate failure over success; that we are too negative. In response, Kenyans might argue this regime's style as an unpredictable pendulum swinging between promising policy adventure and depraved primitive accumulation. But we can be more specific. The International Monetary Fund (IMF's) April Regional Economic Outlook projects Kenya as the sixth largest African economy this year, from eighth two years ago. This is positive, but not time for champagne. Remember the exact same "8th to 6th" celebration a few years ago with Jubilee? Further, isn't growth (even without per capita) the better metric? Yes, we're beating the average growth rate for sub-Saharan Africa, but far from the top 10 fastest growing economies in Africa. For the record, we ranked 18th out of 45 in 2024; will rank 18th again in 2025 and climb to joint 17th fastest in 2026. When will we escape our long-term, business as usual, 4-5 per cent "Kanu" growth rate? BETA/MTP IV projected growth at 6.3, 6.5 and 6.7 per cent from 2024 to 2026! There is a second thought to drive this budget context. As last week's Cabinet dispatch informed us "the government resolved to implement significant budget alignments in line with the policy of fiscal consolidation...and commitment to live within its means". We read that "the initial budget estimates of Sh4.3 trillion will undergo significant revisions before being tabled in Parliament". Notably, the estimates were tabled, with the Finance Bill, the day after the Cabinet meeting. Did Ministries, Departments, and Agencies (MDAs) really have time to make "significant revisions" in the hours before they were tabled? Procedural detail notwithstanding, shouldn't the content of these revisions reflect the unifying spirit and content of the MoU that formalised the broad-based government arrangements? Let's leave out the National Dialogue Committee (Nadco) report - and its constitutional proposals - and consider the other issues. On devolution, shouldn't 2025/26 actualise commitments to stop clawback existing devolved functions but to transfer those remaining at national level; to increase county budget allocations and to guarantee predictability (cash flow planning) and certainty (disbursement) in funds flows? On promoting and protecting youth livelihoods, doesn't 2025/26 deserve a Youth Marshall Plan beyond little tax breaks in the Finance Bill? On inclusivity among all Kenyans, there is a strong argument that this 2025/26 budget should only pass once it demonstrates equity in budget resource allocation at national level, as is already done for counties through the equitable share. Since opulence and corruption also came up in that broad-based MoU, how are they visibly addressed in the budget, especially since the MoU also commits to a new ethos of public spending which stops wastage of resources, promotes government efficiency and enforces accountability? Yes, it is easier to view the broad-based MoU with a cynical political lens, but it also offers useful leverage to shift thinking in our current, fiscally-constrained and distressed budget space. This leads us to a final contextual angle, as offered by former CS and MP and current Presidential Advisor Hon Moses Kuria in a recent X post. As he stated, our Sh4.2 trillion 2025/26 budget exemplifies the rigidity in our current national spending framework - Sh1.3 trillion to debt; Sh1.7 trillion to other recurrent, including wage bill, social spending and parastatal transfers; Sh500 billion to counties leaving less than Sh300 billion for development spending (before foreign grants and loans). Simply, 93 per cent of the budget is "fixed"; we only have 7 per cent to play with. Within this broadly correct data framing, let's close today with three interrelated points. We all agree that we are living the result of Jubilee's decade-long "borrowing for investment" spree while tasked with shepherding rollout of the new constitution. Yes, our debt - now spending - crisis was "rubber-stamped", by omission and commission, in our budget-making Parliament! But blame games about the past are not useful, so many commented that Kuria's post was a call to Kenyans to search for truth and fact when showered with campaign promises in the future. Simply, because politicians are often neither truthful nor factual, Kenyans must be realistic in what before who they are voting for, which means taking time to understand the real issues at stake. For example, consider that every institution or office created by a leader - also referred to as "institutional inflation" - such as State Departments or senior advisory positions, potentially adds rigidity to the budget, so that leader could potentially crowd out his successor's budget space! Which brings us to a box to open in 2025/26, the disconnect between planning and budgeting. "If you fail to plan; you plan to fail", but today's fiscal consolidators view plans as mere "wish-lists". To test for failure, consider this 2023-2027 dataset. Interventions and investments in BETA/MTP IV are costed at a 5-year total of Sh16.1 trillion, to be funded as Sh13.4 trillion from Government (Sh2.68 trillion a year), Sh161 billion from development partners, Sh644 billion jointly between government and development partners and Sh1.93 trillion in public private partnerships (Sh386 billion a year). This is national government's 5-year development budget across our 47 counties. For these same counties, development needs in their 5-year County Integrated Development Plans total up to Sh5.3 trillion, excluding joint flagship projects with national government and other partners (which I have extrapolated from a sample of counties to total Sh2-3 trillion not in the national estimates). The total county funding gap excluding joint flagships was Sh2.8 trillion. Cutting to the chase, the average annual national development budget to deliver BETA/MTP IV is Sh3.22 trillion with an added average annual county development total to deliver BETA-aligned CIDPs of Sh1.06 trillion (Sh22 billion per county per year) and 1.66 trillion with joint flagships (Sh35 billion per county). Basically, the annual development need for Kenya is almost Sh5 trillion. Allocations have fallen over time, today we are at less than 10 per cent of Kenya country need. And we are off tangent, at both national and county level, because we seek to "prioritise resources" rather than "resource priorities". We forget that these are interventions and investments the public identified. Once identified, then we may consider "ways and means" from development operations to private sector participation to public-private partnerships. Instead of planning activities from inputs/resources, we must now plan both projects and service delivery. So here's the real question for today: Shouldn't Budget 2025/26 go back to Plan 2025/26 first?

Beyond debts and deficits: Will budget 202526 chart a new path?

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Beyond debts and deficits: Will budget 202526 chart a new path?

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