‘Pro-poor’ budgeting refers, on the expenditure side, to increasing allocation to basic social and economic sectors that directly reach the poorest people, and to sectors or programmes that indirectly but significantly enhance access to economic and social opportunities. On the revenue side, pro-poor budgeting relies more on progressive taxation. The level to which a country’s budget is pro-poor can be measured by the extent to which it aligns with the country’s poverty reduction strategy, plans and commitments.
This briefing paper assess the pro-poorness of Kenya’s 2016/17 budget, touching on revenue mobilisation; it also considers allocation to deficit financing and debt servicing, as well as to specific sectors and programmes, namely health, education, agriculture, social protection, rural electrification and irrigation in arid and semi-arid areas.
In 2016/17, the Government of Kenya plans to spend Ksh 2.3 trillion (30.6% of GDP), the highest budget ever for the country and the largest in the East African region; it estimates it will collect Ksh 1.5 trillion (20.3% of GDP), a 16% nominal increase from fiscal year 2015/16. Fiscal deficit is estimated to be between 6.9% and 9.3% of GDP. The plan to borrow increasingly from the domestic market might push the interest rate higher – thereby crowding out the private sector and dampening domestic economic activities to the detriment of the poor (in the short-term, at least). On the other hand, 23% of the total proposed budget has been locked for debt servicing, of which 53.8% will be in the form of interest repayments, indicating that the country is increasingly borrowing on short-term concessions and/or on high-interest, non-concessional loans.
The levels of overall revenue collection as well as new sources of taxation have been improving over time. The progressiveness of Kenya’s revenue collection is evident in the share of direct tax in GDP, which is higher than the mean for lower middle-income countries; however, the increase in excise duty on kerosene and the road maintence levy are expected to put further pressure on the poor.
Our analysis on allocation to education indicates that the sector remains one of the country’s priorities. While most allocations (55%) are targeted towards teacher management, pupil–teacher ratios differ across the counties.
Regarding health, despite an increase in budget allocations for national health programmes over time, the country seems certain to miss its 2017 target for reduction in maternal, infant and child mortality rates.
Budgetary allocation to expand irrigation projects for food security in arid and semi-arid land areas has been reduced for 2016/17, but more information is needed to conclude whether the country is on track against its own targets.
The budget for the National Safety Net Programme has increased by 537% between 2012/13 and 2016/17, even though this year’s budget has declined by 1%. It has so far managed to reach 5% of people living below $1.90 a day, particularly older persons, orphaned and vulnerable children, and people living with disabilities.
A success story on pro-poor allocation is the rural electrification programme, whose budget almost doubled between 2014/15 and 2016/17, connecting nearly 95% of public schools and benefiting households around these schools.
In conclusion, there is commendable progress in meeting the Second Medium Term Plan 2013–2017 targets in some sectors, but there is need for the country to ensure that this progress is cascaded down to the county level.
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