Understanding Kenyan Budget Government Priorities for FY 2015_16

The Right Priorities? What Kenyas National Government Spends Money On, 2013/14-2015/16

www.Internationalbudget.org/kenya

Presentation HighlightsBackground to the 2015/16 budget: recent trends in budget allocation and expenditure for 2013/14 and 2014/15 (first half of FY)Implications of past performance for 2015/16.What is new in 2015/16 budget?www.Internationalbudget.org/kenya

*


What should we look at broadly in the budget?How much is going for recurrent versus capital over time?How much is going to which sectors over time? (actually set by BPS) How are priorities changing at program and SP level? (set by budget estimates)How much are we actually spending versus what we budgeted?www.Internationalbudget.org/kenya

*



*Lets start with recurrent v. development, 2013/14


We have actual expenditure data for the first half of the year and we use that to project what the full year spending might be.The next chart shows that we expect to see an improvement this financial year compared to 2013/14 for development expenditure.


*Does the trend change in 2014/15?



*If these projections hold, then our share of actual development spending will have risen between 2013/14 and 2014/15 from 22% to 37%...a pretty major shift


What share of the budget has been going to which sector? 2013/14 and 2014/15For the last two years, education has been allocated the largest share of the budget.The top three sector in terms of allocations have not changed but their share of the total allocations has.While the share of education remained the same in 2013/14 and 2014/15 the share going to infrastucture+energy rose and security declined slightlywww.Internationalbudget.org/kenya

*



*The change in the relative share of the budget over time is a good indicator of our priorities.


Budget implementation efficiency trends?Allocations to sectors should ideally be fully spentImplementation challenges should be addressed to avoid future allocations that will still remain unspent.For the current FY (2014/15), we compared half year implementation data with similar information from the first half of 2013/14.There is an overall improvement in total budget absorption in 2014/15 compared to 2013/14, from 31 percent to 34 percent. Absorption of the development budget in particular improved by 10 percentage points in that same period, from 16 percent to 26 percent.


*


Half-year spending in 2013/14 and 2014/15 by sectorwww.Internationalbudget.org/kenya

*


What can we see from 2014/15 performance so far?We can project how well we will do based on half-year performance data.The way to do this is to look at past years and see how much we tend to spend in the second half of the year compared to the first halfWhen we do this, we see that we tend to spend on average (over last 3 years) about 1.4 times as much in the last half of the year as during first 6 monthsWe use ratios for each sector to project for the full year


*


Projected Expenditure Rates for the Full Year 2014/15www.Internationalbudget.org/kenya

*


Is external funding related to low MDA budget absorption?Often budgeted external funding expected by MDAs at the beginning of the year does not fully materialize.The correlation between absorption rate and external funding for MDAs is negative and fairly strong. In 2012/13, the correlation is -0.49, and in 2013/14 it is -0.78What these numbers mean is that as a ministrys external funding rises, its absorption rate tends to be lower.Here is an example from 2013/14www.Internationalbudget.org/kenya

*



*Relationship between absorption and external funding


What are implications of all of this for 2015/16?Our ability to spend the development budget is rising, but we still tend to overestimate itWe tend to spend more on education and security than we budget, but less on infrastructure, reflecting in part low development spending capacity Sectors with a lot of external funding tend not to be able to spend as much as we hope


*


So, lets look at 2015/16The MDA budget in 2015/16 is Sh 1.5 trillion which is a 24% increase from 2014/15.The recurrent vs development estimate split stands at 52% to 48% compared to 58% to 42% in 2014/15.The allocations to service the public debt as a percentage of the total budget has decreased from 23% in 2014/15 to 18% in 2015/16.However, external funding for MDAs has increased from 16% to 23% in the same period


*


What are the Sector Allocations in 2015/16?Infrastructure+energy has the highest allocation of 27% of the total MDAs budget.Infrastructure is mainly driven by a huge increase in its development budget. Over half (51%) of the entire development budget is under this sector.Education and security take 2nd and third in terms of their share of the total budget.


*



*


What is happening at program level?Sectors were largely set by the BPS, although there are some changes in the budgetWhat are the big changes within sectors or within ministries in this years budget?The biggest changes at program level are highlighted on the next pageWhat do we think about these?


*


Highest increase in allocations to programme in % and absolute terms between 2014/15 and 2015/16www.Internationalbudget.org/kenya

*


Under each MDA, programmes compete for resources based on priorities attached to each.Using the Ministry of Health example, the General Administration, Planning and Support Services "has a huge increase in absolute funding. What could be the cause of this?Looking at SP details helps give some detail on the increase.www.Internationalbudget.org/kenya

*


Change is Programme Shares of the Total Health Budget 2014/15 and 2015/16www.Internationalbudget.org/kenya

*


Example of Sub-Programme Detailswww.Internationalbudget.org/kenya

*


Thank Youwww.Internationalbudget.org/kenya

*


*Start with 2013/14 because it is the most recent year for which we have full expenditure data

The percentage share of recurrent and development to the total MDA budget in 2013/14, changes drastically when we compare allocations to the actual amount spent. The recurrent share of the total budget increases from 58% to 78% as we move from budget to actual spending, while the development share simultaneously decreases from 42% of budget to 22% of actual spending.

This does not mean the recurrent budget went up, it just shows that there is lower absorption in the development budget. We are able to spend more of our recurrent budget than our development budget.

*We discuss the 2014/15 full year expenditure data in more detail in later slides.

**We can see here that education took 26% of the budget in both years; infrastructure increased by 2% points and security decreased by 1% point. Most changes are fairly small. *Overall, the picture that emerges from these comparisons is that security and planning and devolution are performing at high rates. However, education is not performing as well as last year even though it has spent the largest share of the budget in 2014/15 of any sector; infrastructure and energy is also not performing as well in 2014/15 as 2013/14. So 2 of our main sectors in terms of allocation are not performing as well this year as last year.

*The overall absorption rate for the full 2014/15 budget year is likely to be 83%, which is significantly higher than an average of 72% in the last three financial years.Development absorption will still fall below the 80% target by the Cabinet Secretary for Finance at the beginning of the year.

The areas where we are doing particularly well are gender, youth and culture, planning and devolution, as well as lands and housing.The areas where we are doing poorly are international relations and commerce, infrastructure and energy, health, and state administration. Before we put more money into these areas we should consider why we are not spending what we budget.

*

2014/15 Sh 399 billion for public debt repayment against a total budget of Sh 1.8 trillion2015/16 Sh 397 billion for public debt repayment against a total budget of Sh 2.2 trillion

2014/15- MDAs total budget was Sh 1.2 trillion and external revenue was Sh 188 billion2015/16 MDAs total budget is Sh 1.5 trillion ad the external funding is Sh 346 billion

*This suggests that we are putting the most money into the areas that are most development oriented and most externally funded, which are precisely the areas that have the hardest time spending

*The shift in allocations over a period of time give a good indication of what the priorities are in a budget.In this case we compare allocations in 2014/15 and the allocations in the 2015/16 budget estimates.The biggest changes in sector priorities are infrastructure+energy which has increased by 5% between the two years, education and security see a decrease of 4% and 1% respectively in the same period. For the first time in last few years, infrastructure is overtaking education..*We could add some further details about 1-2 cases like health or infrastructure, but am wary of time*One way to look at programme priorities is by their percentage increase in one period over the other.In the 2015/16 Rail Transport has an huge increase of 466%. Other areas include Cabinet Affairs, National Statistical Information Services, Tourism Development and Promotion and International Trade and Investments PromotionAll have over 200% increase in their allocation.The other way is by absolute increase in allocation.Rail transport has the largest increase (121B),Defence,Power Transmission,Teacher Resource Management,policing services and road transport top the list in this case.

*Health Policy Planning increased by more than 3 billion. For what?2 billion increase in planning and feasibility studies. What is this? Not very clear.but the 2014/15 budget suggests this was actually for expansion of NHIFnot a planning and feasibility item but consistent with transfer capital grant to other level of government.1 billion increase in Rural Health1 billion for HSSP 2

*

Understanding Kenyan Budget Government Priorities for FY 2015_16

Documents

Transcript of Understanding Kenyan Budget Government Priorities for FY 2015_16