Experts say Kenya’s budget process has failed to adequately facilitate accurate forecasts for resource collection
Unrealistic revenue projection has negatively affected revenue sharing and worsened the pending bills problem, experts warn.
Senior officials at International Budget Partnership (IBP)-Kenya and the Institute of Certified Public Accountants of Kenya (ICPAK) called on the government to review the revenue forecasts, saying there was a need to make them more realistic.
So doing, they said, will make expenditure predictable across the two levels of government.
“We note that revenue forecasts at both national and county level have been ambitious and often led to budget deficits. We are concerned with the accuracy and the ambitious nature of National Treasury’s revenue projections,” said IBP Kenya Country manager, Abraham Rugo. “Kenya’s budget process has inadequately facilitated accurate forecasts for resource collection.
The common tendency has, therefore, been to make overly optimistic
revenue projections leading to increased uncertainty of resource flows,” he added.
He said considering the Covid-19 pandemic, there was a need to revise the projections, noting that the government has reported a shortfall in total revenue collections (including Appropriations in Aid) every year since 2015.
In financial years 2016/14, 2017/18 and 2018/19 actual revenues collected stood at Sh1.27 trillion, Sh1.34 trillion, and Sh1.47 trillion respectively lower than the Sh1.38 trillion, Sh1.56 trillion and Sh1.69 trillion in ordinary revenue projected for the respective years. As of 2021, total revenue shortfall (including AIA) stood at Sh97.1 billion and stood at Sh138.7 billion in December 2019, according to IBP Kenya.
I have sat on this committee for four years now and I have never seen revenue realised.
Andrew Tanui, a fellow at ICPAK, said Kenya’s economy is unlikely to have rebounded from the effects of Covid-19 in 2021/2022 hence, the need for government to review its revenue projections.
“The ambitious revenue forecast has among other ramifications contributed to budget deficits which have in turn worsened the pending bills problem. The government should therefore review realism of revenue forecasts for predictability in expenditure across the two levels of government,” Tanui said.
The Auditor General says verified eligible pending bills by county governments stood at Sh51.2 billion as of June 30 2018 with another Sh37.7 billion worth of pending bills found ineligible for payment due to lack of documentation. By November 10 last year, the counties had settled Sh39.07 billion (76.2 per cent of their pending bills) leaving an outstanding balance of Sh12.22 billion, according to the Controller of Budget.
The experts spoke yesterday when they appeared before the Senate Committee on Finance and Budget to present their views on the Division of Revenue Bill 2021.
Senators present concurred with the experts, saying the country’s revenue projections have always been overly ambitious.
“I have sat on this committee for four years now and I have never seen budgeted revenue being realised. Every year we fall short by huge margins,” said Senator Farhiya Hajji. Her views were echoed by Kericho Senator Aaron Cheruiyot who observed that prolonged failure to meet the revenue targets had made it very difficult for counties to receive their share of revenue allocation in good time.
Migori Senator, Ochillo Ayacko, called out National Treasury for the late disbursements to counties which it makes between June and July, saying this makes it very difficult for the devolved units to spend the money within the stipulated financial period and account for it.
On the brighter side, Kenya Revenue Authority has in the recent past improvement in revenue collection exceeding its revenue targets in the four consecutive months since December 2020.