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

468 Alta Fölscher
Public Policy Research and Analysis–Treasury Macro Model. The model
analyzes the main components of aggregate supply and demand, assuming
no change in fiscal policy, to generate a consistent macroeconomic and fiscal
framework that shows the implications for public revenue and expenditure.
Over the subsequent months, the budget process includes several iterations
between drafting a fiscal strategy and the model.
The Macroeconomic Working Group
The Macroeconomic Working Group (MEWG) is the central institution in
the macrofiscal phase of the MTEF-budget process. Its members include
representatives from the Ministry of Finance (the Economic Affairs Department,
the Budget Supply Department, the Debt Management Department,
the External Resources Department, and the Investment and Public Enterprises
Department); the Ministry of Planning and National Development
(the Macro Planning Department and the Central Bureau of Statistics); the
Kenya Revenue Authority; and the Central Bank of Kenya. It is responsible
for coordinating the roles of these institutions in producing the forecasts
required for the macrofiscal framework and in producing analysis toward
macrofiscal policy. The MEWG, through its component members, produces
the medium-term macroeconomic and revenue forecasts and discusses policy
options. The group is also primarily responsible for producing the Budget
Outlook Paper (BOPA), the first in a series of two Kenyan prebudget statements,
and updating macrofiscal forecasts and the resulting framework as
the budget preparation process unfolds.
The Budget Outlook Paper
The main instrument driving the annual consideration of fiscal policy and
fiscal targets and the preparation of the macrofiscal framework is the BOPA.
The BOPA is published six months before the minister of finance tables the
budget in the legislature. In it, the government elaborates the medium-term
fiscal framework and provides the background and parameters forming
the basis for the allocative process and the detailed budget. The BOPA is
intended to signal the government’s policy intent to external stakeholders
and discipline the internal budget preparation process by firming up the
aggregate expenditure ceiling through publication. It also acts as an effective
demand for quality information on analysis in the macrofiscal process. The
document formally links annual fiscal and budget policy to long-term
national strategic objectives by reviewing recent performance against the
objectives and proposing a forward fiscal strategy. It discusses recent macroeconomic
developments and provides the government’s assessment for the