Challenging the Budget :- Creating incentives and driving for results By Kenya Delegates

Introduction The budget is the single most important vehicle/mechanism available to any government to use as a means to deliver its national agenda The National Agenda can only be delivered if there is a strong link between the national goals, and the budget The linkage only exists where there is a budget process that allows for comprehensive analysis with a forward looking review and is effective in delivering a budget that is based on outputs and outcomes.

Reforms in the Kenya Budget Programme review and Forward Budget Budget rationalization programme Medium Term expenditure Framework All the reforms were due to the in weaknesses of the budget process in delivering the national agenda

GOALS OF MTEF Fiscal Discipline : Expenditure by line agencies must adhere to hard budget ceilings in order to remain within aggregate resource constraint. Allocative Efficiency: expenditure allocation should address national development priorities Operational (technical efficiency: public expenditure should achieve explicit targets at least cost by applying performance targets of output relative to inputs

Basic Requirements to Introduction of Performance Budgeting The Budget structure:- The budget had to be reclassified into programmes Capacity Building Ownership of the process Incentives The legal Framework

Introduction of Performance Contracting All Ministries signed up their performance contracts in 2005 Each Ministry had targets to achieve which were picked from the strategic plans These targets were however predicated on the Ministry of Finance having to meet it targets on mobilization and releases of resources.

Linking the budget to performance Introduction of programme based budgeting linked to the performance contracting. This is being done as the MTEF with the detailed budget having to be presented to parliament later. Those activities not linked to outputs and outcomes that are part of strategic plans and the performance contracts to be phased out

Challenges to performance Budgeting Incentives: It is quite a difficult job to identify incentives A rigid budget structure: in particular the issue of the administrative and geographical coding Lack of a functioning Integrated Financial Management system Lack of an organic Budget law

What MOF is doing Working on an organic budget Law Ownership of reforms: having to link performance to allocation of resources. Creating an MTEF reallocations line for incentives. All Staff of Ministries are signing up performance contracts and staff appraisals have been linked to outputs that are same as those of the budget Creation of necessary capacity critical to the process

Conclusion Budget reforms are about creating effective systems that guarantee that for any resource available it can be allocated to priorities, accounted for and ultimately there is value for money. The challenge is when that available resource is never available.