What must change for effective State budgeting

Kenya is not doing well in terms of offering jobs to the youth as well as controlling our level of borrowing.

The only way to come out of this rut is by the Government getting its budgeting right.

Budgeting is a must because the benefits of good planning and quality decision-making exceed the cost.

The Government needs to revisit the concept of a budget as an important step to effective management of public debt.

Any good business school will teach you that budgets are conditioned by environments that are largely fluid and therefore always open to regular revision.

It is not manageable that a budget must be implemented at whatever cost.

Bad planning might explain why our borrowing is approaching unmanageable levels.

That the country is sagging under the weight of excessive debt is gradually becoming untenable.

There are several reasons why budgets are made at the national level. First, a budget makes the Government aware of its resources, problems and environment.

Render useless

This, in turn, helps it to know in advance the extent to which the goals set therein are achievable.

Second, a properly interrogated budget will in advance flag cash shortages and excesses, thus forcing appropriate revisions.

Third, the Government is a large and complex institution with various activities that must be coordinated by use of a budget.

The State seeks to meet its goals, and a budget provides a benchmark for evaluating its performance.

A budget must have a philosophy. The key one is that the amounts and other indicators in the budget must be reasonable and achievable. Budgets set at levels that cannot be achieved render them useless.

It is an open secret that as a nation, we are weak in budgeting. This is evidenced in the average project completion rate and cost overruns.

The projects are delayed, and costs are escalated in most cases.

Incomplete projects tap away resources in an unproductive manner.

Budgets are managed on the controllability principle; remember it is your budget only if you can control it.

This is unattainable in the face of political interference. Those implementing the budget must be motivated to enable them to perform. Budgeting enables identification of Government officers who fail to meet targets.

As such, the Government should improve its incremental approach by adopting a total quality budgeting (TQB) approach. A TQB approach emphasises the elimination of inefficiencies, and non-value added activities and that budget levels were set to absolute efficiency.

The idea that budgets are futuristic makes them difficult in terms of measurement and projections. In our case, we have a huge debt that must be serviced in the face of uncertainty about the Government’s future income level.

Businesses are closing down, and the result is a decline in tax revenues.

Multiplier effect 

The country faces a recession because our revenues are falling yet our expenditures are increasing. Government spending can be used to create a multiplier effect, but this requires clinical financial discipline.

Our budgets must aim at pulling us out of the economic decline we find ourselves in as a country.

Unfortunately, there are unforeseen disruptions affecting the private sector such as the recent directive for mandatory use of the Standard Gauge Railway that affected businesses in the coastal town of Mombasa.

Such occurrences dent the quality of life of those affected and reduce taxes for the State.

The Government must, however, not engage in counterproductive activities that end up hurting the very businesses it hopes to raise taxes from. 

Excessive taxation denies many households decent living, and citizens should not borrow to pay tax.

To develop a relevant budget, we require qualified and committed economists.

We need to know how much a shilling spent by the Government impacts the economy. The budget must at the same time stabilise the business cycle.

Pending bills to the private sector are a danger to the Government because instead of a budget being purely about the future, the bills introduce a negative pull effect.

This must be solved for the budget to remain futuristic.  Our budget statement must aim at enhancing the capacity of our economy.

With the high unemployment rate in the country, it is unlikely that our budgets can be focused on economic growth. 

We appear to be in a budget deficit regime that hinders growth. Simply put, we are not putting our resources to good use.

The writer teaches at the University of Nairobi