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

Overview 21
allocations, low budget credibility, pending bills, and stalled projects.
Although there is a need to streamline and sequence the allocation process,
significant gaps and deficiencies remain. The archaic underlying budget classification
and structure are problematic; the development of thorough planning
and budgeting processes in line with MTEF principles at ministerial
levels is behind the central process; costing or baselines and new proposals
are not robust; the division of roles and responsibilities between the ministries
of finance and planning does not support good outcomes, and coordination
is sometimes lacking; and the divide between the recurrent and
development budgets remains. Moreover, the sector working groups’ composition
and scope do not support their effectiveness, and large portions of
spending remain outside of the scrutiny of the budget preparation process.
Budget implementation in Kenya comes with a long history of deviation
from the planned budget. In a departure from the pre-MTEF years, the public
finance reform program in Kenya extended its scope to include budget
execution issues. Key reforms have been the introduction of a cash management
and zero-balance accounts system that attempts to provide ministries
with greater predictability regarding cash releases, while reducing liquidity
in the system. Other budget execution rules exist, such as that new spending
proposals submitted in-year for cabinet approval and bailouts of parastatals
occur from within existing allocations to ministries. A major reform has been
the introduction of an IFMIS in 2003, a reform critical to improved expenditure
control and better financial information. Implementation has, however,
been slow, and so far not a single ministry uses the system to its full capacity.
The government and its development partners have designed a long-term
reform process that systematically and in sequence aims to address remaining
weaknesses. Ultimately, the success of this initiative will be contingent on the
political will in Kenya to make it happen.
The South Africa case study is presented in chapter 15. Since the democratic
transition in 1994, management of the public finances in South Africa
has undergone complete reform to reorient spending toward new priorities
and to overcome fiscal imbalances. The reforms have been underpinned by
the key themes of comprehensiveness and integration; political oversight
and a focus on policy priorities; the strategic use of information; changes to
incentives and behavior; and minimizing of incrementalism and maximizing
of strategic reallocation of funds. Key aspects of budget reform follow:
Integrating the intergovernmental system into a sequenced budget process.
An integrated national and provincial annual budget process provides the
vehicle for operationalizing the intergovernmental finance system. The