Finance minister Njeru Githae will be walking a tight rope as he reads this year’s Budget, which has come in the context of declining revenues, high food prices, an unstable currency and an expanding government bureaucracy.
But the biggest challenge facing the minister in the coming months will be how to navigate the budget process through the transition to a system of devolved government.
Kenya is entering a decisive year, having to implement one of the most ambitious devolution projects in the world that will involve transferring of money and functions of government to 47 entirely new county governments — all at one go.
The challenges will be daunting as he will be operating in uncharted territory. He must deliver on the promise of devolution not only by providing the money, but also guidance in establishing systems of monitoring and accounting for the cash.
Even more critical, the minister must provide the fiscal space and resources to ensure that devolution does not interfere with high-level spending on roads, electricity and ports which President Kibaki’s administration has all along maintained since he took the reins of power 10 years ago.
Indeed, the biggest risk the minister faces right now is what economists call “allocation mismatches” between the county and national governments.
If he ends up in a situation where there is not enough money for either the counties or the national government, the negative consequences for service delivery and for the country’s fiscal health will be far-reaching.
On paper, devolution holds the promise for more equitable development. But the minister will have to strike the delicate balance between redistribution and pro-growth policies.
Another big challenge Mr Githae faces in the coming months is how to deal with a National Assembly that has gone ahead to claim by selectively applying sections of the Constitution, which gives it a role in the making of the Budget, taking advantage of the fact that sections of the new laws which give the Treasury veto powers over money matters are yet to take effect.
The Constitution has given Parliament budget-making powers. Under Section 221, the Cabinet secretary for finance must present spending plans to a committee of Parliament for approval.
This year, the Budget Committee of Parliament demanded and were subsequently provided with estimates of expenditure two months before the Budget as stipulated by the Constitution.
And, the committee did not just stop at scrutinising the estimates. They conducted their own public hearing on the Budget, introduced new ceilings and even conducted re-allocations among ministries.
The upshot is a raging debate as to whether the spirit of the Constitution was to give Parliament powers to play judge and jury, making the Budget, approving it and providing an oversight role on how it is spent.