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

470 Alta Fölscher
Allocating Scarce Resources Strategically
A second key objective of introducing an MTEF was to ensure that public
resources were used effectively and efficiently to support high growth of
income and employment. The aim was to reduce the share of public expenditure
in GDP so that the government’s activities would be focused on a
much narrower range of activities: protecting essential social services and
providing essential infrastructure to support economic growth (Republic of
Kenya 2005).
At the time the MTEF was introduced, improving allocative efficiency
in Kenya had been long thwarted by a persistent disconnect between the
different instruments used for planning and budgeting purposes. In fact,
planning and budgeting processes were fragmented in several ways. The
previous section highlights the separation of macrofiscal and allocative
budget processes and details efforts under the new MTEF-budget process to
remedy the situation.
In addition, Kenyan long-term planning—embodied in the five-year
development plans—was disconnected from shorter-term planning and
budgeting. This problem occurred largely because the long-term plans were
not always constrained by a realistic assessment of available resources.
Hence, the plans were allowed to propose policies and targets that would
turn out to be unaffordable. In contrast, budgeting processes were far more
focused on controlling inputs than on achieving objectives and targets
against priority policies. New policies were introduced to government
outside the budget process, often without an assessment of their budget
implications or opportunity costs, and the budget process itself provided
neither tools nor incentives for spending agencies to discontinue existing
lower-priority spending in favor of new higher-priority policies (Byaruhanga
2004: 15–16).
The institutional separation of planning and budgeting at both the
central and ministerial levels underlay the disconnect between planning and
budgeting. At the central level, planning and budgeting functions were
separately allocated to a Ministry of Planning and a Ministry of Finance: the
former was responsible for long-term plans and worked with central
planning units in ministries, and the latter was responsible for budgets and
provided guidelines to finance and budget officers in ministries. The structure
of the two ministries as separate or joined has changed over time. Even
when they were joined, however, their integration was not necessarily the
result of a thorough consideration of functions; instead, the two structures
were combined, but the overlaps and gaps remained. Within ministries,