Budget-making has made huge strides for the better

The Budget has produced more than its share of dream-spinners and deal makers. From Francis Masakhalia with his tax cut on bicycles to Amos Kimunya’s ill-fated bid to tax MPs last year, the Budget is perhaps the most watched TV show after tallying of election votes.

Many people think a lot has changed about this annual ritual, except perhaps the brash photo display of the briefcase outside Treasury Building by the Finance minister on his (a woman has never held this docket in Kenya) way to Parliament where the Budget Speech is read.

It turns out, though, that the mechanics of budget-making, like the occasional nap by MPs as it is read, have remained largely intact over the years. “But there has been a shift in public awareness,” says Deputy Prime Minister and Local Government minister Musalia Mudavadi, who served as Finance minister for five years in the Moi administration. “People have changed from watching price changes to policy and tax implications.”

The turning point came during his reign when the economy was liberalised, effectively removing price controls. That is why these days supermarkets and shopkeepers no longer hoard goods just before Budget day to make a kill afterwards.

“MPs have become more interested in budget affairs as well,” he says, adding “although they are more sensitive about their remuneration and benefits.” But those outside government have a different take.

The budget-process has made huge strides, they say, from a club of bureaucrats at Treasury, Central Bank, Kenya Revenue Authority and Office of the President, to a more inclusive process, where even the plight of a drunkard is considered.

“Things have changed quite a lot,” says Mr Marubu Munyaka, a financial consultant with PSM Financial Services. “The private sector and the public are more involved.” Mr Munyaka, who has been following the budgetary process over the years, says while budgets have become more reflective lately, they are often let down when it comes to implementation because of lack of resources and political interference.

In the ideal case, everyone should be involved through various representations, as is the case in the US where Congress and the House Budget Office hold sway. “The budget proposals should be circulated around March for people to ventilate their views.”

Kenya appears to be moving in that direction with ever more vigilant MPs and the Parliament Budget Committee (PBC). Legislators recently passed the Fiscal Management Bill, which empowers Parliament to peruse the Budget proposals before they are tabled in the House.

If assented to by the President, this will radically change how the Budget is compiled. “Our economy can perform better and our resources can be managed better if there are many people involved,” says Mr Otieno Ogindo, the chairman of the PBC.

Not so lucky

Mr Mudavadi’s 1993 to 1997 tenure stands out as the era that changed the budget process, perhaps because he is among the few Finance ministers to read five budgets in a row. Most, like Francis Masakhalia, Chris Okemo, David Mwiraria and Amos Kimunya, among others, were not so lucky.

“EAC tariffs were harmonised during my second or third budget,” Mr Mudavadi said in an interview. “Even the cut on bicycle tax that is attributed to Masakhalia was in my budget.” One of the key decisions that Mr Mudavadi oversaw at Treasury were creation of KRA by amalgamating tax departments, which is credited with increased revenue collection today.

He also had the Central Bank Act amended not only to put a cap on government domestic borrowing, but also give security of tenure to the governor. It is also during his time that Kenya Airways was privatised and it remains a template for government divestiture at the stock market.

Budget-making, he says, is a complex process that begins six months in advance. “The budget is both a technical and political process,” he said at his Jogoo House Office in Nairobi. “You have to consult widely; individuals, industry and other stakeholders, the international community and even the IMF and World Bank. It’s absolutely important.”

IF he were Finance minister today, he says he would focus on poverty reduction, unemployment and give hope to the private sector. “Uhuru has a difficult time,” says Mr Mudavadi, who survived two years without foreign aid due to widespread corruption in government. “Even though there’s no aid embargo, the global financial crisis means foreign support will be less.”