Policy Statement promises nothing unusual in CS Mbadi's first Budget

To give credit to him, he was humble enough to engage a public baraza with ‘Bunge La Mwananchi’ at Jeevanjee Gardens in order to build consensus with the public on his economic proposals. In its nature, the BPS is a very technical document that many ordinary folks miss on its details, yet it has far reaching implications on our ordinary lives.

Through the BPS, policy makers at Treasury propose target annual interventions to achieve intended economic outcomes, based on the pre-existing economic environment. They also anticipate what changes, both positive or negative, that may happen in the global and domestic economy in the plan period to account for their impacts during planning.

The question in the minds of many people now is: What has CS Mbadi cooked for us and the country in 2025/26? How is it likely going to shape his tenure at Treasury?

Nothing dramatic

For full disclosure, a single article on a popular national newspaper cannot be expected to do complete and detailed analysis of a document of such great national importance. The scanned copy with the official stamp of the National Assembly as at February 13, has 107 pages before annexures. Inclusive of the annexures, it is 170 printed pages.

I shall, therefore, restrict my analysis to the implications of the key substantive proposals to our ordinary lives. To begin with, the CS has not appended his official signature nor has his Principal Secretary, at least as per the copy published on the website of the National Assembly. Public Finance Regulations of 2015 prescribe brown colour and indelible ink to be used by Cabinet Secretaries for national government entities and County Executive Committee Members at the devolved units to endorse official financial documents/records.  

Whether this is an omission or a procedural practice at Treasury is unclear. However, for experts in official communication and seasoned analysts, this may cast doubt on the validity of the contents in the document. Thus, I undertake this analysis on the strength of the official stamp of Parliament.

Coming back to the substance of the 2025 economic plan, there are no discernible drastic proposals in the entire document. The tone, structure and texture of the plan are similar to any other that has come before it. It does not help that at the time of subjecting the economic plan to parliamentary and citizen public participation, information is trickling to the public that Treasury has proposed re-allocation of an additional Sh5 billion to State House, Deputy President’s office and Office of Prime Cabinet Secretary for salaries, travel and entertainment through supplementary estimates for 2024/25.

Since Kenya Kwanza assumed office, the three top offices have consistently exhausted their budgets by the end of the third quarter. Treasury and CS Mbadi, like their predecessors before, appear helpless in taming extravagance and waste at the top. Implicitly, this alludes to the trap that top political leaders find themselves in from deeply entrenched bureaucratic cartels in key ministries.

The second issue of interest is the big numbers in the economic plan. From the analysis of the planning context, the planners appear to acknowledge slowdown in economic activity and credit to private sector has hurt revenue targets of the government for 2024/25. Thus, they present a revised revenue target of Sh2.57 trillion, down from Sh2.68 trillion. Actual revenues collections as at December 2024 missed target by Sh106.7 billion, with missed targets across all main tax classes of VAT, Income Tax, Excise and Import duties.

Curiously, the CS proposes to increase overall spending in the coming fiscal year. Overall growth for 2024/25 is expected at 4.6 per cent with a modest recovery of 5.3 per cent in the coming year. The global and domestic operating environment is presumed to remain stable, despite the threat of drought and famine that could significantly disrupt agricultural productivity and subsequent public spending.

Not surprisingly, public debt interests and principal redemption is projected to be the single largest expenditure item, estimated to surpass Sh850 billion in interest alone. Development spending is retained at about Sh725 billion, raising doubts on how the projects President Ruto is launching and promising across the country will be financed. For the lovers of Treasury investments, the next fiscal year is projected to be another big harvest, for the plan proposes to bridge the budget deficit with about Sh.641 billion from the domestic market.

Counties will lose about Sh5 billion the coming fiscal year, to take home Sh405 billion, down from Sh410 billion in 2024/25. The plan estimates that about Sh30 billion may be in arrears to the counties as at the end of June. The Equalization Fund takes Sh7.8 billion, with Sh2.7 billion, being arrears owed to the Fund.

The implication of this is that we may repeat the cycle of protracted battles between county bosses and the national government over shareable revenue. The proposed allocations are based on the 2020/21 ordinary revenues in conformity with the requirement for last audited revenues. This exposes the continued failure of Parliament and County Assemblies to comply with the constitutional requirements of Article 229 to consider and take appropriate action on Auditor General’s reports within three months of receipt of the audit reports.

Effectively therefore, the Legislature turns out to be part of the weakest link on the question of sharing resources for the two levels of government and on the timely accountability of public spending. As expected, all monies allocated for recurrent spending are absorbed estimably 100 per cent while development expenditure drags on.   

For those holding pending bills, both at the national and county governments, there does not seem to be any clear end on sight as per the plan. While the planners articulate to dangers of pending bills owed by the government at both levels to businesses, the CS does not seem to offer any conclusive closure on the menace, even with the ongoing transition to accrual accounting for the entire government.

In conclusion, there does not seem to be any observable indicators that FCPA Mbadi means any unusual business at Treasury. However, it may be too early to judge the man. For now, it seems to be the usual gravy train!