A Mwenda and N M Gachocho  (2003)
94 pages (825KB)

If fiscal policy is to be effective, national budgets, and the processes by which they are developed and implemented, must be transparent and participatory. This report from Kenya’s Institute of Economic Affairs shows how a lack of openness and accountability in that country’s budget process has led to poor utilisation and management of public finances. Goals such as poverty reduction can only be achieved by improving budget transparency.

The inadequacies of Kenya’s fiscal policy are evident in the country’s persistent budget deficits, rising debt burden and low economic growth rates. Budget problems can be attributed, among other factors, to high levels of corruption, poor accountability, improper procurement and the secretive nature of the budget process. The budget sets targets that need to be met to ensure economic development. Yet these have been consistently and spectacularly missed, mainly because they are based on unrealistic revenue projections. The result is that the budget dictates spending priorities, and key policy objectives such as cutting poverty are sidelined. This could be rectified through efforts to introduce greater transparency and participation into the budget process.

The legal and institutional frameworks governing the budget contain gaps and inconsistencies that hamper broad-based participation. They also lack adequate checks and balances to prevent misappropriation of funds and manipulation of the system. Specific weaknesses are that:

• Participation is based on a top-down process and has been limited mainly to high-level government officials. Civil society groups, the media, academics and businesses are not adequately included.
• Information on the budget is inaccessible to most stakeholders. When available, it is not timely and is costly to obtain.
• While the budget contains some flexibility to deal with contingencies such as drought, this has often been abused. There are growing numbers of off-budget transactions that have little to do with emergencies.
• Accountability is low, with the budget rarely conforming to government-stated policy. Procurement procedures have failed to stem corruption.
• The budget has not taken a realistic approach to achieving development goals. The use of cost-benefit analyses is rare, and many policies are not implemented because they are too expensive.
• Oversight is inadequate, partly because institutions have not functioned as they should. Non-governmental actors have been given few opportunities for involvement.

In response, a strategic budget framework is proposed, requiring both the decentralisation of the budget process and the creation of functional information systems. It is based around four broad recommendations:

• Continuous advocacy and awareness creation. This includes providing opportunities for widespread consultation and participation, and disseminating better-quality and timely information to stakeholders.
• Capacity building. There is a need for training in budget processes, institutional and legal reform, and the provision of technical support to all participants.
• An integrated approach. Adequate mechanisms should be developed to allow effective participation at all stages of the budget process, including implementation and monitoring.
• Greater collaboration and networking. An all-inclusive budget committee should be established, together with mechanisms to facilitate the pooling of knowledge, experiences and resources.

Source: Mwenda, A. and Gachocho, M. N., 2003, “Budget Transparency: Kenyan Perspective”, IEA Research Paper Series, no. 4, Institute of Economic Affairs, Nairobi.

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