Public Sector Governance and Accountability Series: Budgeting and ...

464 Alta Fölscher
the quality of investment spending. The plan profiled all government investment
projects over the medium term and detailed financing arrangements
and disbursements. It categorized projects into a ranking of core, high priority,
and other. The first year of the plan was the development budget. The
assumption was that a rolling public investment plan would help translate
long-term development plans into annual investment activities (Byaruhanga
2004; Kiringai and West 2002).
Nevertheless, the plan faced similar problems as previous reform efforts.
Although it was supposed to bring greater attention to priorities, it lacked a
strong enough review mechanism and had inadequate links to the rest of the
budget process. Agencies used the public investment plan to introduce new
projects without completing existing ones. At the same time, projects were
not justified in the context of overall sector strategies. The links between the
public investment plan and resource planning were also inadequate: not
even all the core projects were financed.
By the end of the 1990s, despite three major reform initiatives, fiscal
management in Kenya still faced a number of core problems, including
unaffordable levels of spending, insufficient attention to stated policy priorities,
and skewed composition of expenditure, with spending on wages
and interest crowding out necessary complementary spending on operations
and maintenance. A key deficiency remained a failure to establish realistic
resource envelopes. Not one of the three initiatives achieved in any fundamental
way improved forward estimates of revenue. Although development
plans contained longer-term estimates and the resource allocations in the
forward budget added up to an expenditure total, these estimates were not
the result of rigorous forecasting technologies and were unrealistic.
In addition, the introduction of new planning instruments was not
accompanied by sufficient changes to the budget process to ensure rigorous
implementation of new planning modalities. None of the initiatives paid
much attention to the shortcomings of in-year internal control processes; all
three initiatives were still bound by the inadequacies of the budget classification
system and still focused on planning inputs without paying sufficient
attention to measuring performance against policy objectives.
In 1997, the government undertook a critical joint public expenditure
review. The review found that budgeting in Kenya was held back by continuing
deficiencies in macroeconomic management, that the budget process
had very low credibility, and that public sector productivity was very low
(Kiringai and West 2002: 36). Although the reform initiatives were to some
extent institutionalized, the preparation process was in practice still incremental
line-item budgeting. Program reviews, including the evaluation of