From the scary to 'feel good': What CS should spell out in his first statement

The National Treasury Building on on Sunday, February, 18, 2024. [FILE] Treasury CS John Mbadi presents his maiden Budget Statement to Parliament at a time the nation is frayed at the edges - politically, economically and socially. As young people are arrested, abducted and murdered on his watch, President William Ruto insists he is uniting the Kenyan nation. Well, he is definitely uniting Kenyans against his administration. Remember, when public good or bad happens in the country, the buck stops at his desk. That's the job! It is easy to resort to "what-about-ism", that all these bad things happened before. The better perspective for this administration is to recall that they sought high office to do things differently. In the 1990s, we had "No Reforms, No Budget" opposition calls, which seriously disrupted budget addresses inside Parliament. Today, these calls come from everyday Kenyans outside Parliament, and they pervade social media and the streets. This is the context framing today's Budget address. There is a second point to consider. The budget address has always been a fait accompli, assuming the Finance Bill will automatically be passed. What the Finance Bill, 2024, protests reminded us from our constitution was the budget isn't actually done until the Finance Bill is done. Yet, once again, we will get big spending proposals today before the financing framework is signed off. Stepping away from this mixed background, what should we expect in today's Budget Statement? CS Mbadi will open by reminding us that this statement is mandated by Standing Order No241 of the National Assembly and Section 40 of the Public Finance Management Act, 2012 "to make a public pronouncement of the budget policy highlights and revenue raising measures for the National Government". In this preamble, he will paint a broad picture of where Kenya is, leading into this year's budget theme using phrases like "BETA, "green growth" and "enhanced livelihoods". Treasury's standard boilerplate If history is a pointer, the rest of the Budget Statement is built on the Treasury's standard boilerplate. Economic policy context follows the earlier introduction. First, global context and prospects. Second, the domestic (including monetary and fiscal) context and prospects. Take a look at the 2025/26 Budget Summary presented to Parliament in April to get a glimpse into what he will say. The Treasury CS will then turn to policy priorities, including transformation and reform strategies. Here is where we get a wordy narrative on initiatives that are being, or will be, pursued under the Bottom-Up Economic Transformation Agenda (BETA), as well as modern themes such as green growth and digital transformation, and never-ending structural reforms covering public finance, public procurement, public investment, state corporations and the like. If the first three parts of this statement (introduction, context, priorities) offer the budget's skeletal frame, then the fiscal framework in the fourth part takes us into the real meat. This is where revenue raising and expenditure management objectives are laid out before overall projections are presented on revenues, spending, fiscal balance (surplus or deficit) and financing (investing or borrowing). In our deficit position of fiscal balance, we are looking at borrowing. On occasion, this part of the budget statement might also speak to debt management and PPPs. The fifth and sixth parts of the statement bite further into the budget "meat". Part V will outline spending priorities and resource allocations, specifically focused on BETA's five pillars and eleven enablers. This is the "feel good" part of the statement, with lots of foot-stomping in the House. This part will also speak to national government's "priorities" for counties; cue, more applause! Part VI has always been the most sensitive part of the statement, as it deals with tax measures. Expect the Treasury CS to attempt to justify each measure in a Finance Bill that has not been passed. For those with some nostalgia, we miss the days when Finance ministers would actually support these justifications with estimates of revenue raising impact for every single measure. Based on the two most recent 130-page Budget Statements, the address concludes in a bit more than two hours without interruptions and breaks. That's the "business as usual" approach. So, let's ask again - what should we expect? "Should" in this case means "ought to" not "likely to". In the preamble, two perspectives might be useful to get from CS Mbadi. The first is from the 10-point MoU that crystallised the "broad-based government" arrangement. Simply because this 2025/26 budget is the first real opportunity - after appointments that expanded government - to give effect to the MoU, it would be a real shame if we heard nothing on specific measures around devolution, corruption, integrity, waste and inefficiency, national debt and jobs for the youth. The second comes from the World Bank's recent Public Finance Review (PFR) describing Kenya at a crossroads on account of unsustainable debt-financed infrastructure-led growth, fiscal policy distortions, institutional inflation, weak public services, corruption and little trust in government. As the review notes, Kenya can choose one of three paths - business as usual (which is what this 2025/26 budget looks like), austerity (which we do not have the discipline for) or a pro-growth and jobs fiscal policy approach around five policy packages to get our debt picture back to the pre-spree 2010s by 2035. Simply, with the best (third) path, it is only in 2035 that we will get back to where Kibaki left us if we get serious today. That's a scary thought for the next decade. What else would I want to hear? Beyond economic context celebrating progress on our macro-prices (inflation, exchange, interest), a social backdrop around poverty, inequality and jobs. And there is no reason why this part of the statement should not cover savings and investment trends. We also don't get enough fiscal context. For this 2025/26 budget, it would be great to understand, in reasonable detail, audited fiscal outcomes for 2023/24 in addition to estimated outcomes for 2024/25. And there is no harm in sharing 2026/27 and 2027/28 forecasts as well. Revenue strategies On the 2025/26 fiscal framework, the CS might take more time mulling over the balance between government's tax and non-tax revenue strategies, and the trade-offs between the two. Equally, referring to the PFR and going beyond it, where is the thinking on a proper spending strategy beyond austerity and zero-based budgeting gimmickry towards structural change? This would seamlessly flow into the next part on the logic of spending priorities and resource allocations. This part should not simply be about "sexy highlights" for MPs, but the full picture in summary. If Part V is about resource allocation, then Part VI must move beyond tax measures to a comprehensive statement on resource mobilization. In this part we should get justifications and quantifications on each resource mobilization measure - taxes (existing and proposed), non-tax revenue (existing and proposed), development partner support or donor aid (grants and loans), privatisation proceeds and PPP fund raising. In short, a Resourcing, not Financial, Statement. The change? An expanded Part VI balanced against a comprehensive Part V. Is this enough? No, we still get a narrow Budget Statement for the National Government, as each county does theirs. We still have a way to go to, say, a "One Government - Budget for Growth Statement" or "One Nation - Resourcing for Wealth Creation Statement", but every journey begins with a single step.

From the scary to 'feel good': What CS should spell out in his first statement

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