Kenya’s Budget Manual: A Crucial Tool for Supporting Budget Credibility

This article is published in association with IMF.

Institutional memory loss, like its individual counterpart, happens slowly – and then it happens very fast. No finance ministry is exempt from this challenge, but those which address it proactively are better able to build for the future.

Clearly written technical manuals play an important role in retaining accumulated public financial management (PFM) experience. They translate legal frameworks into tangible, real-world guidance for practitioners across all stages of the PFM cycle, while providing a critical learning and reference tool to train officials and serve as a basis to structure IT system development with formats and templates for practitioners.

Yet officials often lack time to develop such manuals. Frequently, they outsource the task to consultants who may not have sufficient time or capacity to adapt good practices to national contexts and ensure stakeholder buy-in. This can easily lead to manuals that rely on a “copy and paste” approach. Typically, such documents are not properly customized or well understood and, lacking the necessary utility, begin to gather dust on the bookshelves. 

Background to Kenya’s reforms

Kenya offers a positive example of how to overcome this challenge. With a strong legal and regulatory framework, Kenya has a solid platform for presenting technical guidance through manuals. The country has a robust record of PFM reforms, particularly in fiscal reporting, but improvements in budget credibility have remained a challenge due to incremental budgeting and inadequate costing.^[1]

In 2017, the President issued an instruction to scrutinize how Ministries, Departments and Agencies (MDAs) cost budget proposals and how these are subsequently challenged by the National Treasury (NT). This decision was prompted by growing fiscal challenges, driven by increased borrowing to finance an expansionary investment drive and spending rigidities in the recurrent budget. In 2017 the authorities requested support from IMF East Africa Regional Technical Assistance Centre (Afritac East) to develop a costing framework. Subsequently, this led to capacity development support to develop a budget manual, led by the Budget Department in the NT with support from Afritac East. This large-scale undertaking took place in three phases.

Phase 1 (2018-2020): Developing a budget costing tool

The process began with the design and pilot of a costing tool by a small internal working group in the NT, followed by consultation with 342 officials from MDAs.  Feedback from the process highlighted fundamental capacity gaps within line MDAs and it became apparent that the costing reforms needed to be anchored in a broader understanding of the budget preparation process. 

Phase 2 (2020-2022): Drafting the budget manual

Initially the structure and content were verified by the Budget Department with working sessions of a core group of technical officers from NT departments. This process helped develop the broad structure and content of the manual, which was canvassed with officials from across the NT, line ministries, and other government entities involved in the budget preparation process.^[2]To ensure a consistent approach, two manuals were developed: one for national government and one for local government. Over the course of two years, more than 400 officials provided input into the design and content of the manual through a series of presentations, working groups and plenary discussions.

Phase 3 (2022-2023): Refining the manual and targeted training materials

Phase 3 focused on consolidating the cumulative drafts into a concise, coherent manual that can be understood and implemented by budget practitioners.  The core technical working group from phase 1 took on the challenge of a detailed review of the manual for accuracy, clarity, and flow, based on a series of Afritac East recommendations. Subsequently, the core team developed training materials, with Afritac East input on technical content and effective communication.

Next steps: Dissemination, training, and IT system development

Manuals for both national and local government governments have now been published and launched for dissemination. A training plan for line ministries and counties has been developed that will be led by the core team of NT officials administered through a training-of-trainers process. The budget costing tool has been integrated into the budget planning module of the IFMIS to support the derivation of sector budget baselines for the current annual and medium-term budget. Sector Working Groups reviewed the budget baseline requirements and prioritized their spending plans based on agreed criteria and within the indicative sector ceilings.

Summary of lessons learned

Kenya’s work in this area provides useful insights into: (i) how to promote reform using a participatory approach to develop a technical manual; (ii) how to use clear and effective language to ensure content is well understood by those who will carry out such reforms; (iii) how to build training modules through a train-the-trainer approach and; (iv) how to effectively link the legal framework, technical manual and IT systems development.

Given high levels of debt and fiscal distress in much of sub-Saharan Africa, transparent, rules-based, and well understood budget processes can play an important role in strengthening public financial management and institutional memory, while building public trust and participation. In this regard, Kenya’s new budget manual serves as an important contribution.

^[1] For example, country diagnostic scores (PEFA, FTE and PIMA) for a comprehensive, credible, and policy-based budget preparation process have remained constant from 2006.

^[2] These included, macro-economic and fiscal policy, public investment management, debt, local government oversight, line ministries, specific commissions related to salaries and pensions and representatives of sub-national (county) governments.