From secrets to statements, and why Kibaki's budgets hit home

Finance Minister Mwai Kibaki outside Parliament Buildings in June 1973. [File, Standard] Today is Budget Day. In the very old days, it was the day when traders would hoard their stocks in the expectation of price hikes from more taxes. We would all be glued to our TVs waiting to hear which of our sins would be punished. In those days, the Finance Bill was pretty much a state secret. Yet, as with all secrets, some people would still have an inside track on what to expect. Sitting as a budget analysis "talking head" in the TV studios of one of our leading media houses, I recall a top industrialist whispering to me about impending changes to the Value Added Tax (VAT) rate before they were officially announced. And here I was, innocently scrambling to assemble the Financial Statement even as the Minister for Finance delivered his Budget Speech. That was 20 years ago. For number crunchers, the Financial Statement offers a great summary in five pages or less of the Budget. Revenue, Grants, Spending, Deficit and Financing (Borrowing). It was the easiest way to read the Moi and Kibaki budgets at a glance, though it disappeared for a while with Uhuru's budgets before reappearing with Ruto's first budget (the current 2023/24 one). But I digress. Because, in this tale from history, we finally got a new Constitution. And we consolidated our multiple public finance laws into a single, organic Public Finance Management (PFM) Act. The big thing the Constitution did was that Parliament, or specifically the National Assembly, not Treasury, makes the budget. As a consideration of three budgets, the Executive, the Judiciary and itself. The assumption, which we are still testing, was that we would have a competent Parliament. Or, to repeat, we elected the right people to represent, oversight, legislate and evaluate. Put more simply, it is the MPs you elected, not faceless Treasury mandarins, who now determine our spending, and the taxes to impose on us. Of course, it's not that independent. As a price for borrowing, the budget has international, specifically, Bretton Woods (IMF/World Bank), inputs couched as conditional advice. And, in our Presidential system of government, Ruto is perfectly in order to influence, through policy guidance from his "university of advisors" and numerical control of Parliament, the actual budget. The only difference we have with the US-style presidential system we adopted is we designed an emasculated Senate with zero veto powers, so the budget is controlled in the National Assembly. If Parliament makes the budget, then why is our Treasury Cabinet Secretary delivering a budget speech? The immediate reason is that this harks back to tradition, including the excellent practice of simultaneous delivery of budget addresses across the East African Community. The proximate reason is it is probably the only annual public address to the nation that isn't full of waffle. In fact, we no longer call it the "Budget Speech". Nowadays, it's the "Budget Statement" to accord with the reality that everything has pretty much been decided on spending and revenues. So what should we expect to hear today from Prof Njuguna Ndung'u, the Cabinet Secretary for the National Treasury and Economic Planning? If we go by his maiden 129-page, three-hour budget statement last year (for current 2023/24), it's probably in seven parts. What are these parts? Well, there's the introduction, which is pretty general, leading into an economic policy context, policy priorities, fiscal framework, resource allocations and tax measures before it gets to a conclusion. This has always been the almost mechanical practice, and format with two subtle differences going by that first address. It lacked a global and regional economic context. And, consistent with post-constitutional addresses, it didn't tell us what each tax measure would raise. Winners and losers If we think about this properly, every proposed tax measure in the 2024 Finance Bill had winners and losers. By casual observation, our public participation response has been infested and infected by what we are losing, not what we might be gaining. The broader national question seems to be how we thrived in a Kibaki tax environment that grew our tax base while we are pained by Ruto's own fiscal efforts. The short answer might be that Kibaki inherited a stable, but stagnant, economy (secular decline et al), while Ruto was handed an unstable (debt treadmill etc), but promising, economy. So the public narrative is Kibaki unlocked our potential with simplicity; Ruto is killing it with complexity. It doesn't help that this administration lacks emotional intelligence and the logic of the sale. It also doesn't help that this administration seems to have accelerated our terrible spending habits without shame. The data tells us that Kibaki refocused public spending, without IMF advice. Back to point. As a former Finance Minister, Kibaki understood that the budget (government) was only one part of policy (economy). Which is why lesser-known initiatives such as downing the bank cash ratio released impressive funding to the private sector. Again, to be fair, he didn't need to stabilize the shilling with usurious interest rates and, relatedly, he didn't inherit a debt cliff. One way to think about times then was we finally got that the economy is a process, not a result. Or, in more modern thinking, the (mostly boring) budget speeches in Kibaki's time were only one part of his transformational quiver of policy arrows. Budget addresses are always boring. The challenge we have in today's times is we are "woke". Today's budget will be trending on social media before it has been processed in mainstream media. So here is what I might want to watch or listen to in this year's statement to address everyday Kenyans. Clearly not the political waffle about this and that as input interventions when we voted for outcomes. Definitively not the macroeconomic babble about primary budget surpluses or reduced balance of payments deficits when the cost of living is killing us with all manner of new tax ideas as we are hectored about living within our means. As the only public address that does not contain political lies, let's dream of a Budget Statement that speaks to our economy first, then our fiscus. Let's get an everyday Kenyan hour, which breaks down this administration's six objectives, five pillars and four themes and how we are doing so far. Then another hour on how government spending fixes this, and our tax obligation. Put it this way. If we really respect the formalization our Constitution gave us as a policy instrument, as well as our basic law, let's look forward to an inspiring policy statement on the future of our economy as lives, living and livelihoods, not a fiscal statement of debits and credits.

From secrets to statements, and why Kibaki's budgets hit home

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