Pledges are fine, but the test is to fund them
African elections do not normally involve debates on the state of public finances. You won’t get concrete, transaction-level promises on how to reduce, or at least manage, public debt, reduce wasteful spending, or ease the tax burden.
It’s even more unlikely that you’ll hear high-level political commitments to prudent and responsible borrowing, balanced budgets, or a predictable tax system. But you’ll be bombarded with promises to throw billions at popular ideas that need real money. While it is fair to admit that our electoral conversation is changing, Kenya is no exception to this rule.
Of course, we are still waiting for long manifestos that the various protagonists, particularly at presidential level – and now increasingly with governors – will present to us. In countries that believe in written manifestos (as long as they are credible) like the UK, manifestos are encrypted.
Recent elections in this part of the world have featured high costs of party manifesto promises by the Tories, but especially Labor and the Liberal Democrats. It helps that a better functioning political party system, each party moving with specific ideological positions, works there. The jury is still out on whether we will ever get to that point in Kenya, especially with the recent amendments to the Political Parties Act.
In places like the United States, where the manifesto is more often represented by a political platform of policy proposals, it is possible to find hidden costs somewhere in the fiendish details. Again, the idea here is simple, someone has to pay for campaign promises, so it makes sense to deal with that before they deal with you as a candidate. It is also common in both places to find independent analysis by researchers, think tanks and the press, so it is quite easy for interested citizens to access the details.
We’re not quite there, and initial commentary and analysis, particularly of the proposals from Vice President William Ruto and Opposition Leader Raila Odinga, have focused on the broad affordability of the ideas that they launched into the public space. Where will the 50 billion shillings for the “scammers” come from? What about the 100 million shillings per constituency? Or the 6,000 shillings per household? On the latter, we have 12 million households in Kenya, so two million households means one in six; four million households are one-third, and six million are half of Kenya – which means shelling out between 144 billion shillings and 432 billion shillings a year.
In our current environment, normal payroll plus operations and maintenance (supply/service delivery) plus interest on debt in FY 2021/22 – each amounting to over 500 billion shillings – will consume all of our tax collection. This is before allocations to counties, debt repayments, and payments for Constitutional Office salaries and pensions.
In the 2022/23 financial year, which the new administration will inherit, the shape of the budget is such that, for example, twice as much (200 billion shillings) is allocated to national security (army and intelligence, excluding police) than to the big four Agenda (food, health, housing and manufacturing). This is why our next president will arrive just after Kenya has secured its fifth Eurobond in nine years.
Try campaigning with these data points to illustrate alternative, but true facts! And that’s just the appetizer!
To their unacknowledged credit, the One Kenya Alliance (OKA) recently began to speak out on public finances, even though the proposed solutions looked like reactive evangelism in the face of relentless populist messages from proponents of the “bottom-up” economic model. Cut taxes in half? Pay off all public debt in the next two years? Kenya is neither nirvana nor utopia.
If anything, our national budget documents – Budget Review and Outlook Paper; The Budget Policy Statement – and the budget itself – should be required reading for anyone imagining, encompassing, or claiming to aspire to the highest position in the land. Fiscal consolidation is now the watchword. This is the tax bed that we have made.
More interesting was the speech on the earthquake by ANC party leader Musalia Mudavadi last Sunday. A failing economy, even in difficulty; Overtaxed Kenyans, rampant corruption; expensive infrastructure; a mountain of debt.
Commentators in the media and elsewhere called it “a true state of the nation address.” Absolutely on point. Has lifted the veil. Tell the hard truths. But that’s all. It’s almost as if we’ve heard our reality, accepted it, and then turned our attention back to the fairy tales of the campaign trail.
Corruption is particularly interesting. Either we refuse to make it a campaign issue, or the people talking about it shouldn’t be talking about it in any form in the first place.
Add to that some wannabes’ suggestions that “we know how to fix the cracks of corruption” or “we’ll jail all the thieves”.
In the meantime, budget theft is probably the most relevant topic of today’s conversation. Now infamous by the former Auditor General as “budgeted corruption”, it is an increasingly entrenched budget culture that targets the “volatile” parts of the budget: operating, maintenance and of development. Essentially, this happens in the procurement of goods and services for day-to-day service delivery (think NYS) or capital projects (think Arror and Kimwarer Dams). The link with the other three frameworks – citizen-level services; policy and planning from above – is obvious.
While corruption is an important part of a debate about public finances; the practice of public financial management (PFM) is somewhat larger than that in the context of our development dreams. So here are four final thoughts on the role of PFM in our electoral conversation. These thoughts begin to explain why it’s one thing to listen to utopian promises, and quite another to get our real context.
The first concerns the discipline of PFM. Overbudgeting is part of the curse in Kenya. In our ten sectors using the Medium Term Expenditure Framework (MTEF) process introduced to us a generation ago by Bretton Woods and other development partners, the trick is to ask for more to get what you want.
It is an approach based on the “scarcity theory” which results in sectors and ministries outbidding the resource ceilings made available by the national treasury, reduced to these ceilings and still promising results without resources. The overbidding of resources in recent years has been in the order of one trillion shillings.
The second is the MTEF discipline itself. The idea behind the MTEF is a government that thinks in the medium term while focusing on the short term on a systematic basis of rolling budgets (estimate the next three years; budget for the next immediate; implement the next immediate when you roll up the budget for the next three years). It’s the kind of policy-planning-budgeting approach that’s supposed to think beyond elections. It just doesn’t work in Kenya; all budgeting is for the immediate next year, period!
The third relates to our development discipline. It’s a bit more philosophical, but it responds to the idea that we can actually have medium-term or long-term projects that we want to implement as a country.
Take LAPPSET as a proof of concept example. Once the issues of viability and sustainability are ironed out, this is a project for the ages, not just as an infrastructure venture for ports, railroads, refineries, roads and towns of resort, but as an idea to open up northern Kenya. We struggle to integrate this into PFM as a process or MTEF as a framework. The result is tiny annual allocations without continued proof of concept or public buy-in.
” Comparative analysis “
The final reflection brings us back, I repeat, to our Budget form. On the cost side, we have a huge payroll and we are trying to weed out ghost workers. We have an operations and maintenance budget filled with ‘jolly jamborees’ with allowances galore for ‘benchmarking’ plus ‘tendering’ of goods and services. Today, after a decade of proliferation of large and small public projects (4,000 according to the IMF/World Bank at the national level; with at least as many across counties), the development budget is spiraling out of control.
To be clear, these are observations from the national government; it’s more basic in counties with bloated, duplicate payrolls and ambitious, cash-hungry development budgets; therefore zero money for the provision of services.
At the height of the NYS scandal, the blame was cast on IFMIS and its problems. The real challenge, however, is a PFM system, or a public finance system that lacks discipline at many levels. The Kenyans are paying for this indiscipline with an increasingly aggressive KRA.
It will be interesting to see what these candidates say about paying for their pledges. It may be more helpful to visualize these payment promises using the true PFM goal where they start and end. Watch this place.
Part 2 continues tomorrow
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