Kenya’s new budget law would modestly advance transparency, but could do much more to engage the public

May 26, 2011

I recently argued in this space that the Kenyan government should bring its draft organic budget law into the light.  Less than a week ago, the Ministry of Finance did publish a draft of a new Public Finance Management Law on its website.  The government is to be applauded for this move, though the period for comment given to the public is quite restricted: the window closes on May 31.  This is not a lot of time for citizens, completely in the dark about the bill’s contents prior to May 20, to comment on an 88-page draft.  In some ways, the decision to post the law, but with limited time for comment, is a striking analogy for the law’s strengths and weaknesses: while it mandates a number of important provisions that will guarantee greater transparency in the budget process, it falls shortest in areas that would facilitate greater public engagement.

First, the good: the government has taken on board a number of important recommendations related to transparency and financial management. 

The law clarifies the distinction between development and recurrent spending, such that the former now refers exclusively to capital spending, rather than mixing capital and donor funds as in the past (p. 10).

The draft explicitly mentions the need for transparency and public participation, and it lays out a timetable for the release of various documents throughout the year (p. 31).  Both a Pre-Budget Statement (Budget Policy Statement) and a Mid-Year Review (Economic and Fiscal Update) are mandated by the new law (pp. 32-3).  Treasury is required to receive comments from the public on the Budget Policy Statement, prior to its publication by February 28 each year.  Quarterly expenditure reports must also be released within 45 days of the end of the quarter (p. 56).  Reports on guarantees provided by government (such as loan guarantees) are required within two months of the end of the financial year (p. 76).

Sound budget management requires limits on the degree to which budgets can be changed after passage, and the draft law limits virement (shifts between different spending categories) to 10 percent of the initial approved amounts (pp. 47-49).  It also limits the size of supplementary budgets to 10 percent, but this is already addressed in the Constitution.

While the draft bill incorporates a number of important provisions, it also neglects key areas, particularly those that would facilitate public engagement and oversight. 

Although the law mandates the production of an Economic and Fiscal Update, it does not guarantee its release to the public in a timely fashion.  And although comments are to be taken by Treasury on the Budget Policy Statement, no timetable is provided to ensure that the public has a reasonable opportunity to provide comment.  The bill does not mention a Citizens Budget, which is considered one of the eight core good practice budget documents that should be produced and published.  The draft law also does not ensure the comprehensiveness of budget documents: it does not mention reporting on tax expenditures, for example.

The draft law requires that the executive budget proposal be tabled in Parliament two months before the end of the financial year (p. 44).  Best practice is to give the legislature three months to consider the proposal.  Moreover, the draft law is not explicit about the need to provide the proposal to the public in a timely fashion, nor does it mention any mechanism for receiving public comment.  The Constitution states that Parliament shall “seek representations from the public” on the budget estimates, but no mention of this is made in the draft law.  Rather than provide more detail than the Constitution, therefore, on this important moment for engagement in the budget process, the law is silent.  The draft bill does explicitly state that the enacted budget should be published and publicized (p. 44).

Both at national and county level, the descriptions of public participation throughout the budget cycle are exceedingly vague.  At the national level, public comment is only made explicit around the pre-budget statement, and, as noted, no timetables or mechanisms are described (public hearings, etc.).  Some level of public engagement should be required at the formulation, approval, implementation and oversight stages of the national budget process.  At the county level, the draft law states that “[e]ach County Treasury shall determine the method and extent and method of participation of the public in the budget process” (p. 51).  This will inevitably mean restricted participation in some counties, where county officials wish to restrain public engagement.  It would be preferable if the method was allowed to vary (to encourage experimentation), but a minimum “extent” of participation (through, for example, public comment at various points) were guaranteed.

The Treasury is required to report on officials sanctioned for financial improprieties (p. 87).  But the draft law does not require the publication of a report on actions taken to resolve irregularities identified by the Auditor General in the annual audit report.  This makes it difficult for Parliament and the public to ensure that adequate steps are taken to deal with financial mismanagement.   The draft law also mentions that the Auditor may pursue investigations pursuant to complaints by members of the public, but it could be more explicit about setting up a system for citizens to communicate complaints to the Auditor.

Although the size of virement and supplementary budgets are limited by the law, there is no such limit placed on the size of the Contingencies Fund, nor on withdrawals from it, nor is parliamentary approval required for the use of these funds (pp.47-8).  This leaves extraordinary discretion to the executive branch to define and manage emergency spending.

Of necessity, a short piece like this cannot cover all of the strengths and weaknesses of a bill that is nearly 90 pages long.

Nonetheless, this brief overview should help to continue the discussion that the government, to its credit, has begun.  The key challenge now is for citizens to find time to debate the legislation before the window for comment closes.  Government could transmit a powerful signal of its intention to take public engagement seriously by extending the period for comment to give the public adequate time to consider the contents of the proposed legislation.

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