PARLIAMENTARY SERVICE COMMISSION

PARLIAMENTARY BUDGET OFFICE

Unpacking the Estimates of Revenue and Expenditure for

2022/2023 and the medium term

MAY 2022

UNPACKING THE 2022/23 BUDGET 1

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Republic of Kenya. The primary function of the Office is to provide professional services in
respect of budget, finance and economic information to the Legislature and the Public.

© Parliamentary Budget Office, 2022

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Email: pbo@parliament.go.ke

UNPACKING THE 2022/23 BUDGET 2

 I. THE 2022/2023 BUDGET IN CONTEXT
1. The 2022/2023 budget will be implemented during a transition period hence the pressure of
having to complete the on-going programs while creating fiscal space for implementation of the
new policy discourse. The budget not only coincides with the first year of the new government after
the upcoming general elections, but also concludes implementation of the third Medium Term Plan and
ushers in the fourth Medium Term Plan. The challenge of the 2022/2023 budget therefore, is to midwife
the two processes smoothly. There is pressure to complete ongoing projects while at the same time
ensuring that the budget provides a sound platform of operation for the next five years.

2. The 2022/23 budget has been prepared against a background of significant internal and external
economic shocks. Internally, the country is experiencing the effects of a fourth consecutive below-
average rainfall season which has adversely affected crop and livestock production. It is reported that
since August 2021, there has been a 48 percent increase in food-insecure people (estimated at 3.1
million in February 2022)1. The persistence of drought conditions could potentially hamper agricultural
production leading to lower economic growth and reduced export earnings. The budget should have
therefore provided significant resources towards drought mitigation measures such as relief food as well
as investing significantly in long term food security measures such as provision of quality inputs (seeds
and fertilizers); and stocking up of the Strategic Food Reserve. This is however not observed to be the
case in the budget proposals.

3. Externally, the Ukraine-Russia conflict portends significant risks to the economy. Kenya is the fourth
largest trading partner with the Russian Federation in Sub-Saharan Africa and relies on Russia for import
of wheat, fertilizers, iron and steel, and paper. On its part, Ukraine is a major exporter of grains in the
world market and over the years, Kenya has imported cereals, oilseeds and seeds, animal/ vegetable
fats and oils from Ukraine. The Russia-Ukraine conflict is likely to bring about significant trade and supply
chain disruptions with adverse effects on both the global and domestic economy.

4. In its agreements with development partners, Kenya has agreed to meet certain fiscal and
monetary targets. In its agreement with IMF, performance benchmarks include target setting for the
budget deficit, tax revenue, stock of central bank net international reserves and public debt targets.
Furthermore, some reforms are expected under revenue administration, government procurement
process, containment of the public wage bill, restructuring of State Owned Enterprises (SoEs) and
rationalization of public investment projects. A review of the 2022/2023 budget indicates continued
expansion of the fiscal deficit above the agreed levels over the medium term. It is further noted that the
expenditure increase that has necessitated expansion of the deficit is mostly in recurrent rather than
development expenditure. The status of rationalization of public investments as an agreed upon
performance benchmark remains unclear even though a list of projects has been provided. The status of

1 FEWSNET, Kenya Food Security outlook, February to September 2022

UNPACKING THE 2022/23 BUDGET 3

 other proposed measures such as restructuring of state-owned enterprises and reforms under revenue
administration also remains unclear.

II. CRITERIA FOR ASSESSING THE 2022/2023 BUDGET

5. To be able to determine the extent to which the budget has met its intended objective as well as highlight
any fiscal and budgetary risks therein, the analysis adopted a four-point judgement criteria for
assessing the budget. The aim of the criteria is to assess the prevalent strengths of the budget while
highlighting gaps and inadequacies that need to be addressed in order to strengthen budget
performance.

a) Adherence to the legal provisions: This criterion evaluates whether the budget documents submitted
adhere to the provisions of the constitution, Public Finance Management Act, PFM regulations and
National Assembly standing orders and any other relevant pieces of legislation.

6. The Estimates of Revenue and Expenditure for FY 2022/23 were submitted to parliament on 7 th April
2022 in adherence to the requirements of Article 221 of the Constitution; sections 15, 25, 37(2) and 38
of PFM Act, 2012; Sections 26, 27,32 &59 of the PFM Regulations 2015; and National assembly Standing
Order 235 that requires that the documents be tabled before 30 th April of every year. The documents
submitted met most of the legal requirements except for the following notable gaps: -
i. The variance in budget estimates for the Executive from the ceilings approved by Parliament in
the 2022 BPS is contrary to section 25(8) of the PFM Act which provides that the budget ceilings
approved in the BPS should form the basis for finalization of the budget estimates. It is however
noted that the expenditure variance from the BPS ceilings is partly due to an increase in donor
funding. The PFM also provides that the Outer years projection should be in line with the BPS
and that is not the case.
ii. There is no explanation as to why the overall deficit has increased compared to the approved
deficit level from the 2022 BPS. This contravenes section 38(a)(1) of PFM that requires the
budget documents to provide a summary of budget policies on revenue, expenditure, debt, and
deficit financing.
iii. Many of the National Assembly Resolutions made during the approval of the BPS have not been
adhered to contrary to Section 38 (1)(f) of the PFM, Act, 2012.

b) Comprehensiveness and credibility: This criteria reviews whether the documents submitted to
Parliament adheres to the set form and format and whether information provided is comprehensive and
credible enough to inform policy.

Documentation submitted
The National Treasury tabled the following documents:
▪ The Budget Summary for FY 2022/23 and the supporting information
▪ The Estimates of Revenue, Grants and Loans for the FY ending 2023

UNPACKING THE 2022/23 BUDGET 4

Documentation submitted
▪ 2022/2023 Annex of estimates of revenue and expenditure for state corporations of the
government of Kenya for FY ending June 2023
▪ Financial statement of the National Government for the FY 2022/2023
▪ List of Projects 2022/23
▪ Recurrent expenditure vol. I and II
▪ Development expenditure vol. I, II and III
▪ The programme based budget 2022/2023 and the medium term
Observation
The budget has been submitted in both programme based format and itemized format with information
provided on key performance indicators, targets as well as expected output and outcome. All the
supporting documents provided have enabled a critical analysis of the budget.
Gaps:
▪ Equalization fund estimates of expenditure for FY 2022/23 have not provided contrary to legal
provisions (Constitution Article 216(4); PFM section 38(b)(ii). The National Treasury attributes this to
the fact that projects to be financed under the second policy have not yet been identified. The
Equalisation Fund Advisory Board was recently constituted and is expected to operationalize the fund.
▪ Non-adherence of the Executive budget estimates to BPS ceilings and widening of the fiscal deficit
without concrete explanation.

c) Alignment with medium-term priorities: This criterion assesses whether the policies in the budget are
aligned with the medium-term strategic priorities of the government as provided for in the policy
documents.
7. The Budget Policy Statement sets out broad policy objectives for the government for a particular financial
year and the medium term. Its therefore important to review the commitment of the government to the
set objectives over the medium term including ensuring medium term fiscal targets are not just a moving
target. A review of the projections of BPS 2020, BPS 2021 and 2022 BPS vs the FY2022/23 Budget
Estimates indicates clearly indicates that the medium term projections provided in BPS for outer years
keep on changing. This means that most of the medium-term goals continue to be moving targets.

8. The 2022/2023 budget is anchored on three key policy documents: The Medium Term Plan III which is
also the anchor document for the Big Four Agenda; the Post-Covid Economic Recovery Strategy (ERS)
and the Economic Stimulus Programme (ESP). This is broadly in line with the policy thrust of the 2022
Budget Policy Statement which was also anchored on these policy interventions. The post-Covid ERS
was developed in August 2020 and was first introduced in the 2020/2021 budget as a key policy
document to mitigate against the impact of the coved pandemic and set the economy back on a rapid
growth trajectory consistent with the projection in Vision 2030 and its third Medium Term Plan. However,
although reference to the document has become a recurring feature in subsequent budgets, it has never
been submitted to Parliament for consideration and approval and its implementation is not monitored.

9. Further, the government is implementing the third Economic Stimulus Programme (ESP) which was first
introduced in the first supplementary budget for 2021/2022. The strategic ESP interventions are

UNPACKING THE 2022/23 BUDGET 5

 anchored in the MTP III, to achieve a resilient and sustainable economic recovery. The ERS and the
ESP thus appear to overlap and duplicate policy interventions. Ideally, focus should have been on
implementing the economic recovery strategy which is a medium term document with long-term policy
interventions rather than an ESP which by its nature should be targeted and time-bound. Indeed, most
of the proposed ESP interventions are part of the MTP III/Big Four agenda and are therefore not new.
For example, the e-voucher subsidy, the credit guarantee scheme (Kshs. 1B) and provision of finances
to SMEs in manufacturing sector through KIE (Kshs. 604 million) are ESP as well as Big Four
interventions

d) Assessment of Allocative Efficiency: This criterion evaluates whether development budget proposals
are guided by the long term national developmental agenda. Have the available resources been optimally
prioritized to finance development programmes that have the highest social and economic outcomes?

10. The allocation for development expenditure stands at 34 percent of the national government budget, this
is in line with the fiscal responsibility principles in Section 15 of the PFM Act, 2012 requiring that
development expenditure be at least 30 percent of the budget.

11. Currently, the National Government is implementing over 4,477 projects across various MDAs. Bulk of
these projects are in the infrastructure sector. As of 30th June 2022, it is estimated that the total
outstanding resource requirement for completion of these projects will be at least Kshs. 5,249 billion2.
The planned development resources for the FY 2022/23 to FY 2024/25 is equal to Kshs 2,770 billion
assuming that no new projects will be introduced in the period. This therefore means that over the
medium term some projects may not be completed as prescribed.

12. In addition, despite the National Treasury having provided a list of projects to be undertaken in the FY
2022-23 and the medium term, a review of status of implementation has not been provided. There is no
status report indicating projects that are either stalled or completely abandoned. As such the rate of
completion of capital projects cannot be ascertained. This makes it difficult to justify the value for money
in the development budget allocation.

III. REVIEW OF THE MACROECONOMIC FRAMEWORK UNDERPINNING THE 2022/23 BUDGET

a. Economic Growth Outlook
13. The National Treasury projects that the economy will grow by 6.0 percent in 2022, supported by a stable
macroeconomic environment; favourable weather conditions to support agricultural output and drive food
processing; and the continued recovery in industry and services. From an expenditure perspective,
private consumption is expected to support aggregate demand. Additionally, the growth outlook will be
reinforced by the ongoing implementation of the strategic priorities of the government in the MTP III, the
Big Four agenda, the Economic Recovery Strategy and the Economic Stimulus Programme.

2
PBO compendium of Projects, 2022

UNPACKING THE 2022/23 BUDGET 6

14. It is noted however that there are inherent risks in each of these economic growth fundamentals. These
are as follows:
a. Erratic weather patterns will adversely affect agricultural production:
a) The country is currently experiencing a fourth consecutive below-average rainy season which
has exacerbated drought conditions and food insecurity across the country. As at February 2022,
it was estimated that there are approximately 3.1 million food insecure people in pastoral and
marginal agricultural areas. The late onset and poor distribution of the March-May long rains
season is expected to result in below average crop production especially in the marginal
agricultural areas thereby worsening the food security situation. Declining pasture and water
sources has also led to loss of livestock and reduced dairy production.

ii. Possible supply chain disruptions will adversely affect some economic activities:
a) The Russia-Ukraine conflict could potentially disrupt supply of various products due to the
role that the two countries play in the global economy and Kenya’s trade linkages with the
two countries. Kenya imports wheat, fertilizer, iron and steel, and paper from Russia. Equally,
Kenya has imported cereals, oilseeds and seeds, animal/ vegetable fats and oils from
Ukraine. The Russia-Ukraine conflict could disrupt the supply chain of these commodities
leading to scarcity and higher commodity prices. Already, there is a reported global surge in
steel prices and the Russia-Ukraine conflict is a contributing factor.
b) Domestically, the construction sector has recently experienced a significant increase in the
prices of cement, iron sheets and deformed steel bars. This cost is attributed to high taxation,
high cost of electricity, high fuel cost and rising global costs of raw materials3 such as clinker
which is used in cement production and iron ore which is a key ingredient of steel. With the
continued increase in global steel prices, the high construction costs may cause construction
projects to stall. Additionally, there is a likelihood of scarcity of cereals (especially wheat),
seeds, fats and oils in the country.

iii. Increasing food and fuel prices could reduce purchasing power especially for middle to low
income households thereby reducing private consumption:
a) At the beginning of the year, Kenyans expressed concern at the perceived rising cost of
living and prevailed upon the government to lower food prices. There has been a notable
increase in the price of basic food commodities such as cooking oil, maize flour, milk, bread,
fruits and vegetables. Food inflation has been on an exponential increase since the
beginning of the year and is currently estimated at 9.92%, up from 8.89% in January 2022.
The prices of food items in 2022 were relatively high compared to January 2021. Going
forward, underperformance of the March-May long rains season will likely lead to food
scarcity and even higher food prices.

3
Nation (2022), why prices of cement, steel have doubled. Retrieved from https://nation.africa/kenya/business/why-
prices-of-cement-steel-have-doubled--3770770

UNPACKING THE 2022/23 BUDGET 7

 b) Furthermore, the recent increase in price of petrol, diesel and cooking gas has contributed
to higher fuel inflation leading to an increase in the transport index. Going forward, the rising
global oil prices are likely to continue exerting upward pressure on domestic fuel inflation
which will increase production costs and transportation costs.

c) Inflation, especially food inflation, disproportionately affects low-income earners.

This is because they are likely to spend a bigger portion of their income on basic
commodities. An increase in the prices of these commodities not only reduces the size and
composition of their consumption basket but also erodes the value of their real wages and
savings. On average, the rate of inflation in a low-income household is higher than in a high-
income household. The erosion in purchasing power implies lower consumption which could
potentially reduce economic activity and therefore lower economic growth.

iv. Increased cost of production due to increased input prices (fuel, commodity prices) will lead
to higher cost of final goods thereby reducing aggregate demand:

a) An increase in commodity prices implies higher cost of raw materials, which translates to
higher production costs. Furthermore, higher fuel prices typically push up production costs
due to the use of fuel-operated machines, higher electricity prices (due to higher fuel cost
adjustment charges) and higher transportation costs. If this price increase is sustained for
an extended period and with the concurrent increase in food and basic commodity prices,
the quantity demanded of other goods is likely to decrease leading to a decline in general
economic activity.

v. Election related challenges could lead to a slowdown in private investment:

a) The 2022 election will bring about a change in regime with new policies and ideas to be
implemented. This has an impact on investment decisions as investors are likely to wait for
the outcome of the elections before making any major decisions. Thus foreign direct
investment (FDI) may not increase significantly at least until after the elections. That is why
Kenyans should invest in having a smooth election and peaceful handover to the new
government.

b) Electoral related spending also tends to result in higher inflation levels due to an increase in
money circulating in the economy. This combined with other aforementioned supply side
inflationary pressures could have an adverse impact on economic growth.

iv. Likelihood of reduced export earnings:

a) Kenya exports cut flowers, tea, fruits and vegetables to Russia, Ukraine and the rest of
Eastern Europe. Russia is among the top 5 importers of Kenya coffee while Ukraine, Poland

UNPACKING THE 2022/23 BUDGET 8

 and Kazakhstan are emerging new markets. Should the conflict persist, therefore, it means
that Kenya’s exports in these potential markets will be substantially subdued leading to lower
export earnings.

b) The risk also extends to likelihood of reduced earnings from the tourism sector. This being
an election year, the country is likely to experience a slowdown in the arrival of tourists until
after the elections. It is noted that the tourism sector was the hardest hit by the Covid-19
pandemic4 with a decline in international visitor arrivals by 71.5 percent and a decline in
export earnings by 43.9 percent. The sector has not yet fully recovered. It is further noted
that Eastern Europe had been identified as a potential source of tourists with popularization
initiatives undertaken in Russia, Ukraine, Poland, Belarus and Czech among others. Indeed,
in the recent years, there has been an increase in tourist arrivals from these destinations.
Thus, the Russia-Ukraine conflict could water down these efforts.

Taking all these factors into account, it is projected that the economy will grow by 4.9 percent5 in
2022.

b. Outlook of key macroeconomic variables:

i. inflation
15. Since the start of FY 2021/22, overall inflation has averaged 6 percent and was mainly driven by
food inflation (see figure 1). The contribution of food and non-alcoholic beverages to overall inflation
has increased from 47.1 percent in July 2021 to 61.2 percent in April 2022 with food inflation recorded at
a 5-year high of 12.2 percent in April 2022. This is attributed to seasonal weather changes that resulted
in low food and forage production and consequently an increase in prices of cabbages, spinach,
tomatoes, onions, Irish potatoes, oranges, and milk during this period. In addition, there was an increase
in the prices of cooking oil and wheat flour due to higher import prices, reflecting reduced international
supply of palm oil 6 , edible oil from South-East Asia and wheat 7 from Russia and Ukraine. This has
therefore made the food basket more expensive with increased retail prices of vegetables, milk, bread,
and cooking oil.

4
2021 Economic Survey
5
PBO projection
6 Indonesia, one of the World’s largest exporters of crude palm oil, banned its export in April 2022. Non-edible palm oil is used as

an input in making soaps and detergents.

7 Kenya imports an estimated 90 percent of its wheat from Russia and Ukraine

UNPACKING THE 2022/23 BUDGET 9

 Figure 1: Trend in Inflation
14.0
12.0
10.0
8.0
5.4 5.1 5.6 6.5
6.0 6.6 6.9
5.9 6.3 6.6 6.5
5.8 5.8 5.7
4.0
2.0
0.0
Aug-21

Sep-21

Oct-21
Apr-21

Apr-22
May-21

Jun-21

Jul-21

Jan-22

Mar-22
Feb-22
Nov-21

Dec-21
Core Inflation Food Inflation Fuel Inflation Overall Inflation

Source: KNBS, PBO

16. Fuel inflation declined during the 2021-22 financial year due to Government’s fuel subsidy8 but is
likely to increase significantly, going forward. Fuel inflation declined from 8.3 percent in July 2021 to
4.2 percent in March 2022 while the contribution of the transport category to overall inflation declined
from 16.1 percent to 6.7 percent during the same period. The Murban ADNOC crude oil prices increased
from USD 73.5 per barrel in July 2021 to USD 85.4 per barrel by January 2022 and this was reflected by
higher landed costs of super petrol, diesel and kerosene. However, fuel prices were kept artificially low
due to the government fuel subsidy which was a compensation out of the Petroleum Development Levy
estimated between Kshs. 14 and Kshs. 28 per litre.

17. Going forward, higher international crude oil prices could render the fuel subsidy unsustainable leading
to higher fuel inflation in the coming months. Already, in April 2022, fuel inflation rose to 6.2 percent with
shortages in the retail supply of petrol and diesel which was attributed to delayed payment of the fuel
subsidy.
18. The overall inflation outlook is bleak and is projected to edge closer to the upper target bound of
7.5 percent. The key risks emanate from higher fuel inflation as international crude oil prices are
expected to increase in 2022 9 and may further be exacerbated by unsustainable fuel subsidy by
Government. This is coupled with a higher food inflation resulting from high food prices due to expected
below average long-rains that will affect food and livestock production; increased international commodity

8 As at April 2022, the Government has disbursed Kshs. 49 million for the subsidy
9 World Economic Outlook, April 2022

UNPACKING THE 2022/23 BUDGET 10

 prices of imports such as wheat and cooking oil and the seep-through effects of high fuel prices to prices
of food.

Table 1: Contribution to the Overall Inflation

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr
Category 21 21 21 21 21 21 22 22 22 22
Food & Nonalcoholic Beverages 47.1 56.5 53.3 56.6 56.5 54.6 57.0 58.6 61.7 61.2
Alcoholic Beverages, Tobacco & Narcotics 1.5 1.4 1.5 1.8 1.8 1.9 2.2 2.2 2.2 1.9
Clothing & Footwear 1.3 1.3 1.4 1.2 0.9 1.1 1.2 1.2 1.1 1.0
Housing, Water, Electricity, Gas and other
Fuels 14.3 11.9 13.5 13.8 15.8 16.7 14.5 14.3 13.6 12.2
Furnishings, Household Equipment and
Routine Household Maintenance 3.0 2.9 2.6 2.4 2.6 3.2 3.6 4.1 4.6 4.1
Health 1.8 1.5 1.7 1.1 0.7 0.5 0.5 0.5 0.6 0.5
Transport 16.1 12.3 13.5 12.8 13.6 14.3 12.8 9.0 6.7 10.2
Information & Communication 4.4 2.9 3.4 3.7 3.1 3.2 3.8 4.0 3.5 2.9
Recreation, Sports & Culture 0.3 0.3 0.3 0.3 0.4 0.3 0.2 0.3 0.4 0.3
Education Services 1.3 1.9 1.8 1.7 1.4 1.3 1.1 1.0 0.9 0.8
Restaurants & Accommodation Services 5.8 3.8 3.8 2.1 0.7 0.2 0.3 2.1 2.3 2.8
Personal Care, Social Protection and
Miscellaneous Goods & Services 2.2 2.3 2.3 2.2 2.2 2.3 2.4 2.4 2.4 1.8
Insurance and Financial Services 0.7 0.7 0.8 0.4 0.4 0.4 0.3 0.2 0.2 0.2
TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Inflation Rate 6.6 6.6 6.9 6.5 5.8 5.7 5.4 5.1 5.6 6.5
Source: PBO, KNBS

ii. Interest Rates and Private Sector Credit

19. The Central Bank Rate (CBR) has been maintained at 7 percent since April 2020 as a monetary
policy stance to signal cheaper credit availability from commercial banks, to support the
domestic recovery. In the 2021/2022 financial year, growth in private sector credit rose from 6.1 percent
in July 2021 to 8.6 percent in December 2021. This reflects positive credit growth as most sectors
recovered from the negative effect of the Covid-19 pandemic10. Strong credit growth was observed in the
following sectors: Consumer durables (15.0 percent), Transport and Communication (14.3 percent),
Manufacturing (13.1 percent), Business services (9.5 percent) and Trade (8.5 percent). In addition, the
credit guarantee scheme that was put in place by the Government to support lending to MSMEs is
reported to have enabled the commercial banks to lend at least Kshs. 12 billion as of a December 2021,
resulting in the employment of 8,975 Kenyans11.

10 Central Bank of Kenya MPC Market Perceptions Survey, January 2022

11 The Budget Summary for FY 2022/23

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20. The short-term interest rates are likely to be higher in 2022 as CBK tackles rising inflation amidst
projected increase in domestic borrowing by Government which may crowd-out lending to the
private sector. The inter-bank rate increased to 4.8 percent in March 2022 compared to 4.2 percent in
July 2021. The 91-day Treasury Bills rate increased from 6.6 percent in July 2021 to 7.4 percent in March
2022 while the 182-day Treasury Bills rate increased from 7.1 percent in July 2021 to 8.2 percent in
March 2022. This increase may be attributed to an increased appetite for domestic borrowing by the
Government as well as enhanced demand for private sector credit as businesses recover from the impact
of the Covid-19 pandemic.

21. The net domestic financing is estimated at Kshs. 581.7 billion in the Budget for FY 2022/23 compared to
Kshs. 570.2 billion in the approved BPS 2022, with the actual net domestic financing12 expected to be
higher given the tight room for external borrowing coupled with the delays in amendment to the debt
ceiling which the domestic borrowing could be higher.. This may crowd-out lending by commercial banks
to the private sector. In addition, the projected upward pressure on overall inflation may result to a
possible review of the CBR and if this happens, commercial banks would be forced to increase the
interest rates.

Figure 2: Trend in Interest Rates Figure 3: Trend in Private Sector Credit Growth
9
8
7
6
5
4
3
2
1
0

91 T-Bill 182 T-Bill

Interbank Rate Central Bank Rate

Source: Central Bank

12
FY 2019/20 Kshs. 450.3 billion; FY 2020/21 Kshs. 626.9 billion; revised FY 2021/22 Kshs. 664.4 billion

UNPACKING THE 2022/23 BUDGET 12

 iii. Exchange Rate
22. The Kenyan Shilling depreciated against the United States dollar and the Pound Sterling in the
2021-22 financial year. The exchange rate to the USA dollar increased from 108.14 in July 2021 to
114.95 in March 2022. This depreciation is attributable to an international rise in demand for dollars from
the energy sector. It also depreciated against the Pound Sterling from 149.37 in July 2021 to 151.13 in
March 2022. However, it remained stable compared to the Euro from 127.89 in July 2021 to 127.80 in
March 2022. Further, in comparison to selected East African countries the Kenyan Shilling remained
relatively stable and exchanged at 31.23 to the Ugandan Shilling in March 2022, compared to 32.84 in
July 2021; and the Tanzanian Shilling from 21.44 to 20.18 to during the same period.

23. Going forward, the Kenyan Shilling to the USD may be grasping at straws not to depreciate further as
the demand for the USD outweighs supply due to higher import bills especially of petroleum products;
capital outflows mostly from the Nairobi Stock Exchange (NSE) following the hike in the US interest rate
which raises the demand for USD denominated assets; USD restrictions by CBK and worsened by
declining foreign exchange reserves that act as a buffer to cushion exchange rate shocks.

24. Remittances inflows decreased by -4.5 percent in February 2022 to USD 321.5 million, compared to USD
336.7 million in July 2021, with a spike in December 2021 of USD 350.6 Million which can be attributed
to enhanced remittances during the Christmas festivities. This was also reflected in the decline in foreign
exchange reserves from USD 9,341 million (5.7 months of import cover) in July 2021 to USD 8,284 million
(4.9 months of import cover) by April 2022.

Figure 4: Trend in Exchange Rate

UNPACKING THE 2022/23 BUDGET 13

 Source: Central Bank
IV. KEY HIGHLIGHTS OF THE 2022/2023 BUDGET

Where is the money going?

25. The total budget for the FY 2022/23 financial year is Kshs 4,045.21 billion. This comprises of Kshs.
1,387.9 billion recurrent expenditures, Kshs 715.5 billion development expenditure, Kshs 869 billion
Consolidated Fund Services and Kshs 370 billion county equitable share and principal debt
redemptions amounting to Kshs 702.5 billion.

Table 2: Overall Outlook of Budget Estimates for FY 2022/23

2020/21 % 2021/22 % 2022 BPS % 2022/23 %
Share Share (indicative Share Estimates Share
of total of total ceilings) of total of total
Executive Recurrent 1,208.86 36.1% 1,346.37 35.8% 1,279.9 31.9% 1,322.9 32.7%
Development* 700.16 20.9% 677.89 18.0% 726.0 18.1% 711.4 17.6%
Total 1,909.02 57.0% 2,024.26 53.8% 2,005.9 49.9% 2,034.3 50.3%
Parliament Recurrent 33.49 1.0% 36.01 1.0% 48.2 1.2% 48.2 1.2%
Development 2.87 0.1% 2.40 0.1% 2.1 0.1% 2.1 0.1%
Total 36.35 1.1% 38.41 1.0% 50.2 1.3% 50.2 1.2%
Judiciary** Recurrent 15.11 0.5% 16.48 0.4% 16.9 0.4% 16.9 0.4%
Development 2.56 0.1% 2.59 0.1% 2.0 0.0% 2.0 0.0%
Total 17.66 0.5% 19.07 0.5% 18.9 0.5% 18.9 0.5%
CFS Public Debt related 954.87 28.5% 1,151.29 30.6% 1,393.1 34.7% 1,393.1 34.4%
expenses ***
Pensions, Salaries 115.31 3.4% 158.19 4.2% 178.7 4.4% 178.7 4.4%
&Others
Total 1,070.18 31.9% 1,309.48 34.8% 1,571.8 39.1% 1,571.8 38.9%
Overall Recurrent 1,257.45 37.5% 1,398.85 37.2% 1,344.9 33.5% 1,387.9 34.3%
Development 705.58 21.1% 682.89 18.2% 730.1 18.2% 715.5 17.7%
CFS 1,070.18 31.9% 1,309.48 34.8% 1,571.8 39.1% 1,571.8 38.9%
County 316.50 9.4% 370.00 9.8% 370.0 9.2% 370.0 9.1%
Governments****
Total 3,349.71 3,761.23 4,016.8 4,045.2

*Includes Equalization Fund (Kshs. 7.1 B) and Contingency Fund (Kshs. 4.0 B)
**Judiciary and Judicial Service Commission
***Comprised of domestic and foreign interest payments and debt redemptions.
****Equitable Share as enacted in the Division of Revenue Act

UNPACKING THE 2022/23 BUDGET 14

 SECTORAL ALLOCATION IN THE 2022-23 FY BUDGET ESTIMATES

26. Analysis of the sectoral allocation of resources over the last three years indicates that there has been no
major shift in government expenditure policy as allocations as a share of ministerial allocations has
remained within the same range with very minor changes. Three sectors account for 61.5 percent of the
total ministerial expenditure for the FY 2022/23. These are Education sector (25.9 percent), Energy,
Infrastructure and ICT sector (18.5 percent) and Public Administration and International relations (17.1
percent).
27. The variations in allocations to the Energy, Infrastructure and ICT sector from the BPS ceilings is
necessitated by an additional Ksh. 10 billion to the State Department for Energy to connect electricity to
750,000 new customers and 869 public facilities to the grid and generate 85.7MW from geothermal.
Further, Ksh. 8 billion to State Department of Infrastructure ministry is to construct approximately 6,107
km of roads and rehabilitate 300 km of roads. The additional allocation to the Education sector is for
enhancing Competency Based Curriculum (CBC) preparedness, recruitment of additional teachers,
construction of additional classrooms and related infrastructure as well as to support ongoing reforms in
the Education sector.

Table 3: Analysis of Sectoral Allocations, FY 2020/21- FY 2022/23(Ksh. Billions)

SECTORS 2020/21 % 2021/22 % 2022/23 % Share
Approved Share Approv Share Estimat in Total
Estimates in Total ed in Total es Ministerial
Ministe Estimat Minister Expenditu
rial es ial re
Expen Expend
diture iture
1 Agriculture, Rural and Urban 67.1 3.4% 74.0 3.8% 69.0 3.3%
Development
2 Energy, Infrastructure, and ICT 425.0 21.6% 340.5 17.5% 389.8 18.5%
3 General Economics and Commercial 25.4 1.3% 22.3 1.1% 25.6 1.2%
Affairs
4 Health 121.8 6.2% 121.1 6.2% 122.6 5.8%
5 Education 489.4 24.9% 504.0 26.0% 544.4 25.9%
6 Governance, Justice, Law, and Order 199.1 10.1% 217.3 11.2% 234.6 11.2%
Of which Judiciary 17.7 0.9% 19.1 1.0% 18.9 0.9%
7 Public Admin and International Relation 302.7 15.4% 327.9 16.9% 359.8 17.1%
Of Which Parliament** 36.4 1.9% 38.4 2.0% 50.2 2.4%
8 National Security 167.8 8.5% 162.2 8.4% 177.8 8.5%
9 Social Protection, Culture and Recreation 60.0 3.1% 72.2 3.7% 73.1 3.5%
1 Environmental Protection, Water and 106.2 5.4% 100.6 5.2% 106.7 5.1%
0 Natural Resources
Grand Total 1,964.4 1,942 2,103.4

UNPACKING THE 2022/23 BUDGET 15

** The parliament share includes Kshs 11 billion for 2022/23 hence its share net of the one offs is
lesser than last year.

The allocation share for infrastructure is substantially falling despite the sector having most of
development projects.

EXPENDITURE UNDER THE ECONOMIC STIMULUS PROGRAMME III

28. The Government is rolling out the third phase of the Economic Stimulus Programme (ESP) at Kshs 20.6
billion. The ESP is expected to accelerate the pace of economic growth by putting in place strategic
interventions under agriculture, health, education, drought response, infrastructure, financial inclusion,
energy, and environmental conservation.

29. An Economic Stimulus Program is a short term, targeted and time bound intervention to correct effects
of macroeconomic shocks. In other words, it’s a designed positive and timely shock to the economy to
correct imbalances brought about by a downside risk. The proposed ESP defeats the need and the
meaning of an Economic Stimulus Programme. Was it really necessary to design a stimulus program to
realize CBC classrooms and recruitment of additional teachers, rather than the same being realized
under the ongoing education sector reforms dilutes. Other interventions such as recruitment of additional
healthcare interns and sanitation improvement could equally be realized under the Universal Health
Coverage while subsidy of farm inputs could be streamlined within the food and nutrition security of the
Big Four Agenda. There are concerns on whether the Kazi Mtaani Programme is a sustainable job
creation strategy or a form of government handout to the youth. Indeed, the actual contribution of this
programme to the economy and its overall impact upon completion is not well defined. Below is a
breakdown of the ESP priority areas and allocations in the 2022/23 budget estimates.

Allocation Intervention
Kshs 2.1 billion Under the Kazi Mtaani programme
Kshs 4.0 billion Construction of classrooms to support CBC
Kshs 2.75 billion Improve Infrastructure for Primary and Secondary schools
Kshs 1.5 billion Recruitment of contract teachers and ICT interns
Kshs 1.35 billion Recruitment of additional diploma and certificate level Health interns
Kshs 5.8 billion Improving environment, water, and sanitation facilities
Kshs 1.5 billion Subsidize supply of farm inputs through E-voucher system
Kshs 1.0 billion Credit Guarantee Scheme
Kshs 604 million Credit to SMEs in the manufacturing sector (KIE)

UNPACKING THE 2022/23 BUDGET 16

 INTERVENTIONS UNDER BIG FOUR AGENDA
30. Kshs 146.8 billion has been allocated in the FY 2022/23 to support implementation of priority
programmes under the “Big Four” Agenda in various Ministries. These are distributed as follows:

a) Food and Nutrition Security

31. The Food and Nutrition Security pillar of the Big Four Agenda is conceptualized to achieve food and
nutrition security by 2022 through reducing overreliance on rain fed agriculture, availing locally blended
fertilizer, enhancing production as well as productivity of both large scale and smallholder agriculture and
putting an additional 700,000 under sustainable agricultural production. To support programmes under
the Food and Nutrition security Kshs 46.8 billion has been allocated to support the following interventions:

Allocation Intervention
Kshs 4.2 billion National Agricultural and Rural Inclusivity project
Kshs 1.5 billion Small Scale Irrigation and Value Addition Project;
Kshs 1.7 billion Kenya Cereal Enhancement Programme
Kshs 1.9 billion Emergency Locusts Response
Kshs 1.6 billion National Value Chain Support Project;
Kshs 690 million Food Security and Crop Diversification Project;
Kshs 7.0 billion Kenya Climate Smart Agriculture Project
Kshs 1.1 billion Agricultural Sector Development Support Programme II
Kshs 2.6 billion Aquaculture Business Development Project;
Kshs 2.8 billion Kenya Marine Fisheries and Socio-Economic Development Project
Kshs 1.3 billion Exploitation of Living Resources under the Blue Economy
Kshs 1.65 billion Kenya Livestock Commercialization programme (KeLCoP)

32. It is noted that at the sunset period of the programme, the country is facing severe food insecurity in at
least 24 counties as well as high fertilizer prices. In FY 2022/23, the government intends to double the
E-voucher for fertilizer subsidy to 29,380 MT of assorted fertilizers. This is expected to benefit 100,000
farmers. However, as compared to the previous year, the budgetary allocation has increased by Ksh.
320 million to Ksh. 1.35 billion. This may imply that the allocation may not be adequate to subsidize the
targeted assorted fertilizers annually. It is also noted that the e-voucher subsidy programme has been
routinely subjected to budget cuts in the supplementary budget.

UNPACKING THE 2022/23 BUDGET 17

 b) Affordable Housing Pillar

33. In FY 2022/23, the Affordable Housing Pillar targets provision of 500,000 units of decent and affordable
houses by the government. The pillar further seeks to establish a Contributory Social Housing
Development Fund and a Mortgage Refinancing Programme, among others. The budget estimates
provide for Kshs 4.6 billion for operationalization of the Kenya Mortgage and Refinancing Company.

34. The performance indicators given in the programme-based budget do not clearly indicate the milestones
to be realized by the Kenya Mortgage and Refinancing Company but only notes 100 percent transfer of
resources but not what these resources are supposed to achieve. To promote access to affordable
housing, the government has allocated Kshs 27.7 billion for the following interventions:

Allocation Intervention
Kshs 4.6 billion Operationalization of Kenya Mortgage and Refinance Company (KMRC);
Kshs 7.7 billion Kenya Affordable Housing Project (Kenya Mortgage Refinance Company) ;
Kshs 1.0 billion Construction of affordable Housing Units;
Kshs 5.9 billion Kenya Informal Settlement Improvement Project – Phase II;
Kshs 1.05 billion Housing Units for National Police and Kenya Prisons;
Kshs 2.3 billion Kenyan Urban programme
Kshs 1.2 billion Construction of Social Housing units

c) Universal Health Coverage

35. This strategic pillar of the Big Four Agenda is aimed at providing access to affordable and universal
healthcare services to 100 percent of the population by 2022. This is to be realized through upgrading of
existing healthcare facilities, equipping through managed equipment services, construction of new
facilities, enrolment under National Hospital Insurance Fund, training, and recruitment of additional
healthcare workers, among others.

36. The programme was initially piloted in four counties and later scaled up to cover the entire country.
However, only about 2.5 million households to date have been covered out of about twelve million
households. Existence of numerous interventions, some duplicating each other has hampered delivery
of a seamless UHC to promote universal health coverage in the country. In FY 2022/23, Kshs 62.3 billion
has been allocated to universal health care in the 2022/23 financial year aimed at the following
interventions:

UNPACKING THE 2022/23 BUDGET 18

 Allocation Intervention
Kshs 5.2 billion Managed Equipment Services
Kshs 4.1 billion Free Maternity Health Care
Kshs 1.9 billion Medical cover for the elderly and severely disabled in our society
Kshs 9.3 billion Roll out of Universal Health Coverage
Kshs 18.1 billion Kenyatta National Hospital
Kshs 11.7 billion Moi Referral and Teaching Hospital
Kshs 7.7 billion Kenya Medical Training Centre
Kshs 7.7 billion Universal Health Coverage Coordination and Management Unit
Kshs 5.2 billion Vaccines and Immunizations
Kshs 1.2 billion Procurement of Family Planning and Reproductive health commodities
Kshs 900 million Transforming Health systems for UHC
Kshs 619 million Procurement of equipment at the National Blood Transfusion Services
Kshs 1.1 billion Kenya National Hospital Burns and Pediatrics Centre
Kshs 300 million Procurement of Cyber Knife Radiotherapy Equipment for KUTTRH
Kshs 2.0 billion Construction and strengthening of Cancer Centers
Kshs 16.2 billion Global Fund (HIV, Malaria, TB)

d) Support to Manufacturing
37. This pillar is designed to catalyze performance of the manufacturing sector and targeted to increase the
contribution of the manufacturing sector to Gross Domestic Product from 9.8% in 2018 to 15% by 2022.
This is to be realized through revitalization of textile, leather; agro-processing and construction sector.
Despite several interventions in the sector, the actual contribution of manufacturing to GDP has been
declining over time to about 7.6% in 2020. There is lack of a well-coordinated strategy in streamlining
interventions under the manufacturing sector. In the FY 2022/23, the government has set aside Kshs
10.1 billion to promote local industries under the manufacturing pillar targeting the following areas:

Allocation Intervention
Kshs 2.6 billion Development of a Freeport and Industrial parks-SEZ Mombasa
Kshs 1.0 billion Credit Guarantee Scheme
Kshs 3.0 billion Supporting Access to Finance and Enterprise Recovery (SAFER)
Kshs 1.3 billion Kenya Industry and Entrepreneurship project
Kshs 626.0 million Provision of finances to SMEs in manufacturing sector KIE
Kshs 200.0 million Constituency Industrial Development Centre
Kshs 85.0 million Development of SEZ Textile Park in Naivasha
Kshs 142.8 million Cotton development (RIVATEX)-subsidy and extension support
Kshs 410.4 million Modernization of RIVATEX

UNPACKING THE 2022/23 BUDGET 19

 V. FINANCING OF THE 2022/2023 BUDGET
38. Over the past six years, the revenue target set in the budget estimates has on average been over Ksh.
150 billion above actual collection. Despite setting relatively more credible tax revenue targets in 2020/21
FY, which can be partially attributed to the arrangements under the Extended Credit Facility (ECF) and
the Extended Fund Facility (EFF) for Kenya with the International Monetary Fund, preliminary actual
ordinary revenue collection was still over Ksh. 70 billion below the target set. Further, since 2019/20 the
collection from Appropriation in Aid has been below the target set.
Table 4: Revenue in Ksh. Billion
2018/19 2019/20 2020/21 2021/22*
Approved
Budget Budget Budget Prel Budget Revised
Est Actual Dev Est Actual Dev Est Actual Dev Est Est 1 Dev
Revenue &
grants 1,998 1,724 (274) 2,155 1,757 (398) 1,949 1,815 (134) 2,101 2,191 90
Total Revenue 1,949 1,704 (245) 2,116 1,737 (379) 1,893 1,784 (109) 2,039 2,125 86
Ordinary Rev 1,769 1,500 (269) 1,877 1,573 (304) 1,634 1,562 (72) 1,776 1,808 33
Income tax 837 685 (151) 884 707 (177) 685 694 9 834 824 (11)
VAT 464 414 (50) 496 384 (112) 482 411 (71) 473 477 4
Import duty 119 107 (12) 135 98 (37) 107 108 2 119 119 (0.2)
Excise duty 219 194 (25) 242 195 (47) 241 216 (25) 241 260 19
Other 130 99 (31) 119 189 70 119 133 14 108 129 21
Appropriation-
in-Aid 180 205 25 239 164 (75) 259 222 (37) 263 316 53
Grants 48 20 (29) 39 20 (19) 57 31 (26) 62 66 53
Expenditure &
Net Lending 2,557 2,434 (124) 2,796 2,565 (231) 2,791 2,749 (42) 3,030 3,215 4
Deficit Including
Grants (560) (710) (641) (809) (842) (934) (930) (1,024)

39. Tax policy measures proposed each financial year by the National Treasury during the budget-
making process have not enhanced revenue collection. Consequently, income tax and Value Added
Tax (VAT) collection have not grown in tandem with the economy over the last nine years. Between
2013/14 and 2019/20, income tax as a share of GDP declined by about two percentage points whereas
VAT as a share of GDP declined by about one percentage point. Therefore, without a medium-term plan
with quantifiable policy measures aimed at reversing the decline in tax collection as a share of GDP the
trend is expected to persist.

UNPACKING THE 2022/23 BUDGET 20

 20.0%
Figure 5: Tax Revenue as a Share of GDP
15.0%
Percent of GDP

10.0%

5.0%

0.0%
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021 2021/22*
Income tax VAT Import duty Excise duty Other tax revenue

*Approved Revised Estimates I

40. The National Treasury projects a total revenue collection of Ksh. 2,480 billion (17.5% of GDP) in
2022/23 FY of which, ordinary revenue will be Ksh. 2,142 billion (15.3% of GDP). Over the medium
term, ordinary revenue as a share of GDP is projected to increase to 16.2 percent. However, given the
lack of a Medium-Term Revenue Strategy with specific proposals aimed at enhancing revenue collection,
the medium-term revenue targets are unlikely to be achieved.

Table 5: National Treasury Revenue Projections (KSH. Billion)

2019/20 2020/21 2021/22 2022/23 2023/24 2024/25
Approved
Prel Budget Revised BPS Budget
Actual Actual Est Est 1 ‘22 Est Dev Proj Proj
Revenue & grants 1,757 1,815 2,101 2,191 2,478 2,480 2 2,869 3,195
Total Revenue 1,737 1,784 2,039 2,125 2,431 2,447 16 2,821 3,146
Ordinary Rev 1,573 1,562 1,776 1,808 2,142 2,142 - 2,516 2,823
Income tax 707 694 834 824 997 997 - 1,179 1,286
VAT 384 411 473 477 585 585 - 692 793
Import duty 98 108 119 119 145 145 - 170 181
Excise duty 195 216 241 260 297 297 - 347 395
Other 189 133 108 129 118 118 - 129 168
Appropriation-
in-Aid 164 222 263 316 290 305 16 305 323
Grants 20 31 62 66 47 33 (14) 48 49
Expenditure & Net Lending 2,434 2,749 3,030 3,215 3,324 3,343 18 2,366 2,578
Deficit Incl Grants (846) (862) (693) (680)
Deficit Excl Grants (893) (896) (741) (730)
As a percent of GDP (%)
2019/20 2020/21 2021/22 2022/23 2023/24 2024/25
Approved
Prel Budget Revised BPS Budget Dev
Actual Actual Est Est 1 ‘22 Est PP Proj Proj
Revenue & grants 16.7% 16.0% 16.6% 17.3% 17.7% 17.7% - 18.4% 18.3%
Total Revenue 16.5% 15.7% 16.1% 16.8% 17.4% 17.5% 0.1 18.1% 18.1%
Ordinary Rev 15.0% 13.8% 14.0% 14.3% 15.3% 15.3% - 16.1% 16.2%
Income tax 6.7% 6.1% 6.6% 6.5% 7.1% 7.1% - 7.5% 7.4%
VAT 3.7% 3.6% 3.7% 3.8% 4.2% 4.2% - 4.4% 4.6%
Import duty 0.9% 1.0% 0.9% 0.9% 1.0% 1.0% - 1.1% 1.0%
Excise duty 1.9% 1.9% 1.9% 2.1% 2.1% 2.1% - 2.2% 2.3%

UNPACKING THE 2022/23 BUDGET 21

 Other 1.8% 1.2% 0.9% 1.0% 0.8% 0.8% - 0.8% 1.0%
Appropriation-
in-Aid 1.6% 2.0% 2.1% 2.5% 2.1% 2.2% 0.1 1.9% 1.9%
Grants 0.2% 0.3% 0.5% 0.5% 0.3% 0.2% (0.1) 0.3% 0.3%
Expenditure & Net Lending 24.4% 24.2% 24.0% 25.4% 23.7% 23.9% 0.1 22.8% 22.2%
Deficit Incl Grants (7.7%) (8.2%) (7.4%) (8.1%) (6.0%) (6.2%) (4.4%) (3.9%)
Deficit Excl Grants (7.9%) (8.5%) (7.8%) (8.6%) (6.4%) (6.4%) (4.7%) (4.2%)
Nominal GDP 10,504 11,351 12,646 12,646 14,002 14,002 15,617 17,420

41. Revenue raised from Appropriation in Aid is expected to increase to Ksh. 305 billion in 2022/23.
The expected revenue from Appropriations in Aid is significantly higher than the actual receipts of Ksh.
164 billion in 2019/20 and Ksh. 222 billion in 2020/21. Some of the main drivers of the increased A in A
projection for 2022/23 relative to actual receipts in 2020/21 include a significant increase in the collection
from the Road Maintenance Levy (RML), fees charged by Universities, the Petroleum Development Levy
(PDL) and Betting. However, given the inaccuracy in previous projections of A in A, the target set for
2022/23 may not be achieved. A comparison of A in A estimates from the fiscal framework, Budget
Estimate books and Estimates of Revenues Grants and Loans book is provided in figure xx below for a
detailed breakdown of A in A see Annex 3

Budget Estimate Books 2022/23 A in A

2022/23 Appropriations in Aid Estimates
Budget Estimate Books Estimates of Revenue, Fiscal Framework AIA
2022/23 A in A Grants, and Loans Books 2022/23
AIA 2022/23

Recurrent AIA 210,120,901,114 240,187,116,807 210,120,901,114

Development AIA 85,187,570,000 114,260,486,707 85,187,570,000
RML to Counties 10,088,000,000 10,088,000,000
Grants (20,838,827,972)
Total 305,396,471,114 333,608,775,542 305,396,471,114
Notes:
1) The fiscal framework provides a projected A in A of Ksh. 305 billion while the budget books indicated that the total
A in A is Kshs.295 billion. The Ksh. 10 billion difference between the two figures is the Road Maintenance Levy
(RML) to Counties.
2) The difference between the total A in A recorded in the budget estimate books and the Estimates of Revenue,
Grants, and Loans book reflects the fact that the Estimates of Revenue, Grants, and Loans book presents the
expected revenue collection from the Railway Development Levy (RDL), Petroleum Development Levy (PDL) and
RML rather than the expected expenditure by the respective MDAs.

42. The National Treasury projects that ordinary revenue as a share of GDP will increase to 16.3
percent over the medium term. However, the 2022/23 budget estimates were not accompanied by the
medium-term revenue strategy that was expected to provide quantifiable revenue enhancement
measures, therefore it is expected that ordinary revenue as a share of GDP will remain below 15 percent

UNPACKING THE 2022/23 BUDGET 22

 over the medium-term. Further, PBO estimates that ordinary revenue collection for 2022/23 will be
around Ksh. 1,981 billion.

Table 6: PBO Baseline scenario Ksh. Million

2020/21 2021/22 2022/23 2023/24
Prel Actual Proj Proj Proj
Total Revenue 1,783,747 1,969,724 2,231,265 2,515,038
Ordinary Revenue 1,562,015 1,750,428 1,981,472 2,235,001
Income tax 694,053 806,241 910,037 1,047,819
VAT 410,758 468,985 543,757 600,360
Import duty 108,375 118,499 137,901 159,235
Excise duty 216,325 239,549 265,300 296,227
Other revenue 132,504 117,154 124,477 131,360
Appropriation-in-Aid 221,732 219,295 249,793 280,037

43. Income tax collection has underperformed relative to expectation over the first three quarters of
the 2021/22 FY. Slower than expected recovery by some companies from the impact of the Covid-19
pandemic coupled with the collection of withholding tax on dividends based on the performance of
companies at the height of the pandemic in 2020/21 resulted in the Kenya Revenue Service missing its
target for collection of other income tax over the first three quarters of 2021/22 FY by Ksh. 17 billion.
Consequently, it is unlikely that the National Treasury will meet its 2021/22 target for income tax
collection. PBO projects that income tax collection in 2022/23 will be about Ksh. 910 billion based on the
assumption of relatively slower economic growth in 2022.

Figure 6: Income Tax

1,400,000
1,200,000
1,000,000
Ksh. Million

800,000
600,000
400,000
200,000
-

Actual PBO Forecast Printed Estimates

UNPACKING THE 2022/23 BUDGET 23

44. Over the medium-term, the National Treasury expects to increase VAT collection as a share of
GDP from 3.6 percent to over 4.6 percent. However, the expected increase in VAT as a share of GDP
is unlikely to be realized without renewed enforcement in the use of ETR or a reduction in the category
of goods that are VAT exempt or zero-rated. Consequently, it is expected that VAT as a share of GDP
will remain around 4 percent with PBO projecting a collection of between Ksh. 543 billion and Ksh. 564
billion.
45. The National Treasury projects that excise duty collection will be Ksh. 297 billion in the 2022/23
FY. Unlike VAT and income tax whose collection as a share of GDP has been on a downward trend,
excise duty collection as a share of GDP has remained relatively consistent. It is expected that excise
duty collection as a share of GDP will remain around 2 percent with the collection for 2022/23 expected
to be around Ksh. 265 billion.
46. The National Treasury projects a significantly higher growth in all the major revenue categories
in 2022/23 and the medium-term. As a result of the more optimistic revenue projections, the fiscal deficit
as a share of GDP excluding grants (including grants) is expected to improve from -8.5 percent (-8.2
percent) in 2020/21 to -4.7 percent (-4.4 percent) in 2023/24. However, due to our more conservative
revenue projections in the outer years, and the lack of a comprehensive strategy by the National Treasury
to enhance revenue collection, PBO projects that ceteris paribus, the fiscal deficit target for the medium-
term will be unattainable.
47. The fiscal deficit inclusive of grants for 2022/23 has been adjusted upwards by Ksh. 16.38 billion from
the BPS 2022 estimate of Ksh. 846.1 billion to Ksh. 862.5 billion. The expanded deficit is expected to be
financed mainly by additional domestic borrowing. However, it should be noted that in the past, due to
the setting of overambitious revenue targets during the budget-making process, the actual deficit has
tended to be higher than what is captured in the printed estimates therefore it is likely that the actual
deficit for 2022/23 will exceed the estimated Ksh. 862.5 billion. The financing of the fiscal deficit is
presented in the table below.

Table 7: Financing of the Fiscal Deficit (in Ksh. Billion)

2020/21 2021/22 2022/2023
Prel Approved Budget
Actual Revised BPS Est Dev
Fiscal Balance (incl. grants) Cash Basis (929.3) (1,024.3) (846.1) (862.5) (16.38)
TOTAL FINANCING 950.2 1,024.3 846.1 862.5 16.38
NET FOREIGN FINANCING 323.3 360.0 275.9 280.7 4.83
Disbursements 451.6 562.0 518.4 521.8 3.44
Commercial Financing 114.3 124.3 105.6 105.6 -
o/w Export Credit- Commercial Financing 6.7 -
Sovereign Bond other Commercial Financing 107.6 124.3 105.6 105.6 -
External Debt Operations - Refinancing - -
Semi concessional Loans - -
Project Loans AIA 104.8 148.7 204.3 184.9 (19.39)
Project Loans Revenue 52.4 85.7 97.7 101.6 3.89
Project Loans SGR _Phase I_ AIA 4.6 -

UNPACKING THE 2022/23 BUDGET 24

 Project Loans SGR _ PHASE 2A_AIA 6.9 -
Use of IMF SDR Allocation - 40.3
Programme Loans 168.6 163.8 110.7 129.7 18.93
O/W P for R Programme Loans 11.0 3.5 3.5 3.5 -
IMF - RCF/ECF/EFF 76.9 57.5 63.2 63.2 -
Development Policy Operations - WB 80.8 82.5 44.0 44.0 -
Support for COVID-19 Vaccine Purchase - 8.1 - 6.2 6.22
Development Policy Operations - ADB - 11.7 - 12.7 12.71
Debt repayment - Principal (128.3) (202.1) (242.5) (241.1) 1.40
NET DOMESTIC FINANCING 626.9 664.4 570.2 581.7 11.55
Government Securities 556.3 664.4 566.8 578.6 11.75
Government Overdraft & Others 13.6 - - - -
Government Deposits (77.6) 129.4 - - -
Domestic Loan Repayments (Receipts) 6.3 1.5 4.5 4.3 (0.20)
Domestic Loan Repayments CBK (1.1) (1.1) (1.1) (1.1) -
Increase in Other Accounts Payable 129.4 (129.4) - - -
Financing gap 20.9

VI. CONSOLIDATED FUND SERVICES (CFS)

a) Introduction
48. Consolidated Fund Service (CFS) expenditures comprise of mandatory expenditures and are therefore
a first charge on the Consolidated Fund. These expenses primarily consist of public debt servicing
expenditures, pension payments, salaries and allowances for constitutional and independent office
holders, among other expenditures. Overall CFS expenditures for the FY 2022/23 are projected to
amount to Kshs. 1.57 trillion. This is an increase of Kshs. 262.3 Billion (20%) from the 2021/22 CFS
budget of Kshs. 1.31 trillion. In FY 2023/24, these expenditures are projected to reach Kshs. 1.8 trillion
due to external debt servicing.
Figure 7: CFS Expenditures, FY 202021 – FY 2024/25 (Kshs. billions)

2000

1500

1000

500

0
FY 2020/21 FY 2021/22 FY 2022/2023 FY 2023/2024 FY 2024/2025
Source: Budget Estimates 2022/23

49. Given that the CFS expenditures are a first charge to the consolidated fund, their management is critical
for creation of fiscal space to successfully implement other budgetary activities. The ratio of CFS
expenditures relative to ordinary revenues presents a worrying trend. For FY 2022/23, CFS expenditures

UNPACKING THE 2022/23 BUDGET 25

 are expected to account for 64% of Ordinary revenue, up from 60% in FY 2020/21. In FY 2023/24, the
proportion of CFS expenditure to ordinary revenue is expected to reach 67%. This therefore implies
limited room to freely undertake fiscal policy in the short-term and medium term, without incurring further
debt or encountering liquidity constraints that could impede smooth implementation of projects.

50. The largest components of CFS expenditure include:

a) Public debt servicing expenditures which constitute 89% of the total expenditure. This component
has increased by 21% from Kshs 1.15 trillion in FY 2021/22 to Kshs 1.39 trillion in FY 2022/23.
b) Pensions expenditures, which account for 11% of total CFS expenditures. In FY 2022/23, this
component will amount to Kshs. 171.8 billion. The increase in pensions is largely due to an increase
in commuted pensions by 11% and an increase in Public Service Superannuation Scheme (a
contributory pension scheme for public servants in the year 2021 which is expected to ease
expenditure pressure for payment of retirees in the long-term from the consolidated fund) by 24%.
c) Kshs 2.26 Billion payment of Kenya Airways guaranteed debt. This will increase to Kshs. 28.26
Billion in FY 2023/24. In total, Kshs. 52.7 Billion will be spent over the medium term.

51. CFS expenditures have become the largest expenditure head in FY 2022/23. At Kshs. 1.57 trillion, this
expenditure will equate 112% of recurrent expenditure and 233% of development expenditure. This
indicates that a larger share of the budget goes to these mandatory expenditures. However, despite
being the largest component of expenditure, detailed information or appropriate explanatory notes are
not availed to enhance transparency and scrutiny as required for mainstream government expenditures.

Figure 9: National Expenditure, FY 2022/21 (Kshs. Figure 10: CFS Expenditure & Share of Revenue (Kshs.
Millions) Millions)
2000 2000 80%
1500 60%
1500
1000 40%
1000 500 20%
500 0 0%
FY FY FY FY FY FY
0 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26
Ministerial Ministerial Dev. CFS
Reccurent Expenditure Expenditures Total CFS % Total CFS to Total Revenue

Source: Budget Estimates FY 2022/23 Source: Budget Estimates FY 2022/23

UNPACKING THE 2022/23 BUDGET 26

 b) Public Debt Servicing Expenditure
52. Public Debt Servicing expenditures (interest payments and redemptions), required to finance the
repayment of Kshs. 8.2 trillion13 public stock of debt, will constitute the largest share of CFS expenditures
- at 89%. The total public debt is projected to reach Kshs. 11.5 trillion14 by June 2025 on account of
expanding fiscal deficit. Without subsequent restructuring of public debt, Public Debt Service
expenditures will continue to increase over the medium term. Notably, Domestic debt which accounts for
49% of total debt stock, 73% of total debt servicing expenditures, carries with it the highest cost and risk
characteristic.
53. In FY 2022/23, these expenditures are to increase by Kshs. 241.8 billion (21%); from Kshs. 1,151.3 Billion
in FY 2020/21 to Kshs 1,393.1 Billion in the FY 2022/23. The increase in public debt is as a result of: a)
15% increase in domestic debt interest, and 34% in domestic debt redemption. Debt service is on an
upward trend and over the medium term and is projected to peak at Kshs 1,671.48 Billion in FY 2023/24
due to the payment of 2018 International Sovereign Bond (USD 2.0 BN) worth Kshs 241.75 Billion, and
spiking in external debt Service expenses.
Figure 11: Comparison of Domestic & External Debt Service Expenditures (Ksh. Billions)

2000

1500

1000

500

0
FY 2020/2021 FY 2021/2022 FY 2022/2023 FY 2023/2024 FY 2024/2025

Domestic debt service External debt service TOTAL

Source: FY 2022/23 Budget Estimates

i) Domestic Debt Service

54. Domestic debt accounts for 49% of total debt stock. Thus domestic debt service is not only the largest
component of public debt service expenditures but also the largest CFS expenditure item. Total domestic
debt service will amount to Kshs. 1.015 trillion in FY 2022/23, accounting for 73% of public debt servicing
expenditure and 52% of total CFS Expenditures. This indicates the high cost of domestic borrowing
(domestic debt interest expenditure accounts for 80% of total interest expenses). Domestic debt service
is largely driven by interest expenditure (Kshs. 553 billion) which will account for over 50% of domestic
debt servicing over the medium term.

13
Central Bank of Kenya Weekly Bulletin.
14
Budget Summary April 2022
Figure. 12: Domestic debt servicing expenditures, FY 2020/21 – FY 2024/25 (Kshs. Billions)

1,200

1,000

800

600

400

200

-
FY 2020/2021 FY 2021/2022 FY 2022/2023 FY 2023/2024 FY 2024/2025

Interest Payments Redemption Payments Total Domestic Debt Service Expenditure

Source: FY 2022/23 Budget Estimates

55. A review of the domestic debt repayment profile indicates that interest payments will accrue every month
while redemption expenditures will occur only in certain months, leading to in-year repayment shocks.
As such, it is anticipated that the months of December 2022 and February 2023 will have the highest
debt servicing expenditures. It is further noted that approximately 51% of domestic debt service will occur
between November 2022 and April 2023. This may bring about liquidity constraints during this period.
Appropriate cash flow management measures should therefore take this into consideration.
Figure 13: Estimated FY 2022/23 Domestic Debt Servicing Expenditure Profile

120
100
80
60
40
20
0

Redemption Payment Interest Payment

Source: FY 2022/23 Budget Estimates

ii) External Debt Service

56. External debt service will amount to Kshs. 378.3 billion in FY 2022/23; an increase of 15%. This increase
is driven by external debt redemptions (19% increase) and interest payments that account for 9% of the
increase. It will account for 27% of the total debt service expenditures in FY 2022/23, which is a slight
decline from 29% in FY 2021/22 on account of Debt Service Suspension Initiative (DSSI). External debt
(which accounts for 51% of total debt) and related debt servicing, is exposed to exchange rate volatility
- primarily movements of the USD and Euro - which account for 66% and 19% of the currency
composition of the external debt portfolio.

UNPACKING THE 2022/23 BUDGET 28

Figure 14: External Debt Redemption (Ksh. Billions).

800

600

400

200

-
FY 2020/2021 FY 2021/2022 FY 2022/2023 FY 2023/2024 FY 2024/2025

Interest Payments Redemption Payment Total External Debt Service Expenditure

Source: 2022/23 Budget Estimates

57. The increase in external debt redemption was mainly due to increase in external debt redemptions to
Poland, Nordic Development Fund, Kuwait, Saudi Fund EIB, China and China Development Bank.
External debt redemption is further expected to spike in FY 2023/24 as the payment for the 2018
International Sovereign Bond (USD 2.0 BN) worth Kshs 241.75 Billion falls due. This will increase debt
service expense from Kshs 241.06 Billion to Kshs 475.6 billion. Over the medium term, a total of Kshs.
998.12 Billion will be incurred to meet external debt redemption.
58. External debt interest payment is expected to increase by 9% from Kshs 126.06 billion in FY 2021/22 to
Kshs 137.24 Billon in FY 2022/23. The increases in external debt interest is mainly due to debt owed to
Germany, ADB/ ADF, Austria and Exim Bank of South Korea. The slight increase on the external interest
repayment is influenced by the fact that a large part of the external debt stock is composed of
concessional loans which attract low interest rate as well as the Debt Service Suspension Initiative (DSSI)
that suspended repayment for low income countries to enable them fight the effects of the Covid-19
pandemic.

c) Pensions Payments
59. The total pension’s bill is expected to increase by 12% from Kshs 153.64 Billion to Kshs 171.83 Billion
between FY 2021/22 to FY 2022/23. The increase in pension expenditure is attributed to i) 9% increase
in ordinary pension from Kshs 64.10 Billion to Kshs 69.55 Billon, ii) 11% increase in commuted pension
from Kshs 68.47 Billion to Kshs 76.16 Billion and iii) 24% increase in Public Service Superannuation
Scheme (PSSS) from Kshs. 20.83 Billion to Kshs. 25.88 Billion.

Table 8: Summary of Pension Expenses (Kshs. Billions)

Summary FY FY FY FY FY FY
2020/21 2021/22 2022/23 2023/24 2024/25 2025/26
Ordinary Pension 55.24 64.10 69.55 82.93 91.23 100.35
Commuted Pension 55.71 68.47 76.16 80.35 88.39 97.23
Other Pension Schemes 0.19 0.24 0.24 0.24 0.24 0.24
Public Servants Superannuation - 20.83 25.88 28.46 31.31 34.44
Scheme (PSSS)
TOTAL 111.14 153.64 171.83 191.98 211.17 232.26

UNPACKING THE 2022/23 BUDGET 29

Source: Budget Estimates FY 2022/23

60. The increase in ordinary pension in the next financial year is due to a 23% increase in Monthly pension
to retired Presidents (from Kshs 34.4 Million to Kshs 42.4 Million), 17% increase to Members of
Parliament (from Kshs 1.49 Billion to Kshs 1.74 Billion), and 24% increase in Public Servants
Superannuation Scheme (from Kshs 20.83 Billon to Kshs 25.88 Billion). Similarly, increase in the
commuted pension is due to an increase of 33% in Gratuity to Retired President and other designated
officers and 86% increase in gratuity to Members of Parliament from Kshs 0.98 Billion to Kshs 1.83
Billion.
61. These increases in pension and gratuity to the President, Deputy president and other designated officers
as well as Members of Parliament is due to the upcoming general election in which the President, Deputy
president and other state officers will be retiring and therefore eligible for Pension. Similarly, Members
of Parliament who will not be re-elected but have served more than two terms will be eligible for monthly
pension.
62. The Public Servants Superannuation Scheme commenced on 1st January 2021 as a contributory pension
scheme for workers in public service. Under the scheme, an employee contributes 7.5% of their basic
salary and the employer matches with 15%. The allocations to the PSSS which is equivalent to employer
contribution to scheme will increase over the medium term to reach Kshs 34.44 Billion by Financial year
2025/26. The contribution pension scheme is expected to ease payment pressure from the exchequer in
the long–term.

d) Salaries & Allowances

63. Salaries and allowances for holders of constitutional and independent offices will amount to Kshs. 4.59
billion; a marginal increase from Kshs 4.54 Billon in FY 2021/22. This expenditure component is
estimated to reach Kshs 5.40 Billion in FY 2024/25 possibly due to end of terms of service for
commissioners. In FY 2022/23, the major increases will include; Salaries and Personal allowances for i)
Controller of Budget, ii) Public service commission and iii) Kenya National Commission on Human Rights.
Figure 15: Summary of Salaries, Allowances and Miscellaneous (Kshs. Billions)

6
5
4
3
2
1
0
FY 2021/22 FY 2021/22 FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26

Source: Budget Estimates 2022/23

e) Guaranteed debt
64. Article 213 of the Constitution and Section 58 of the PFM Act allow the government to provide loan
guarantees upon approval by Parliament. As at June 2021, the total outstanding guaranteed debt

UNPACKING THE 2022/23 BUDGET 30

 amounted to Kshs. 157.2 Billion15, comprising of Kshs 80.9 Billion and Kshs 76.2 Billion for commercial
and bilateral loans, respectively. This is a 215% increase from Kshs. 49.9 billion in FY 2014/15; indicating
increased risk of contingent liabilities. If more guaranteed loans become callable, a heavier burden of
repayment is transferred to the government thereby exacerbating fiscal sustainability concerns.

65. In FY 2022/23, Kshs. 2.26 Billion will be incurred to meet interest payment for guaranteed loan for Kenya
Airways (this is in addition to the Kshs. 36.6 billion cash bailout offered under Vote 1071 – The National
Treasury). This guarantee is based on Sessional Paper No. 3 of 2017, through which the National
Government undertook to guarantee loan facilities to the Kenya Airways PLC as follows: i) Guarantee of
$525 million (Long Term Loan) to US Exim bank (Export Import Bank of the US) in order to deliver liquidity
savings to KQ over five (5) years, and ii) Guarantee of $225 million (Short Term Loan) to local Kenya
banks, primary to support working capital requirements.

66. There is a change of financing strategy to support the Kenya airways company. There will be a shift from
providing financial support/cash injection, to meeting debt servicing repayment only. It is estimated that
between FY 2020/21 and FY 2022/23, the company will have received Kshs. 83.1 Billion in cash bailouts,
to keep it operational during a loss incurring period. By FY 2025/26, a total of Kshs. 72.2 billion will be
incurred to meet payment of called up guaranteed debt. It is therefore critical that a review of the
composition of the portfolio, and the financial status of institutions whose loans have been guaranteed to
establish imbedded risks and whether remedial measures can be taken to avoid further materialization
of the guarantee liability.

Table 8: Kenya Airways Financial Support, FY 2020/21 – FY 2025/26 (Kshs. Billions)

FY FY FY FY FY FY Total
2020/21 2021/22 2022/23 2023/24 2024/25 2025/26
Cash Bailouts 20.0 26.5 36.6 - - - 83.1
Guaranteed Payments - - 2.3 28.3 22.2 19.6 72.2
Total Annual Financing 20.0 26.5 38.9 28.3 22.2 19.6 155.3
Source: Budget Estimates FY 2022/23

Figure 16: Guaranteed debt payments, FY 2021/22 – FY 2025/26 (Kshs. Billions)

15
Annual Debt Management Report as at June 2021

UNPACKING THE 2022/23 BUDGET 31

 30 28.26

25 22.16
19.55
20

15

10

5 2.26
0 0
0
FY 2021/22 FY 2021/22 FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26

Source: Budget Estimates FY 2022/23

f) Observations
i. Overall CFS expenditures for the FY 2022/23 are projected to amount to Kshs. 1.57 trillion, and will
reach Kshs. 1.8 trillion in FY 2023/24 due to increase in external debt service.
ii. Given that the CFS expenditures are a first charge to the consolidated fund, their management is
critical for cash management and creation of fiscal space to successfully implement other budgetary
activities.
iii. The ratio of CFS expenditures relative to ordinary revenues will increase from 60% in FY 2020/21 to
64% in FY 2022/23. This indicates an increasingly constrained fiscal space and liquidity constraints
that could impede smooth implementation of the budget.
iv. Domestic debt service is not only the largest component of Public debt service expenditures but also
the largest CFS expenditure item. Total domestic debt service will accounting for 73% of public debt
servicing expenditure, 80% of total interest expenses and 52% of total CFS Expenditures. This
indicates the high cost of domestic debt stock.
v. December 2022 and February 2023 will have the highest domestic debt serving expenditures and
approximately 51% of domestic debt service will occur between November 2022 and April 2021.
vi. The slight increase in external interest repayment is influenced by large concessional composition
of external debt stock and a positive impact of the Debt Service Suspension Initiative (DSSI).
vii. Since FY 2014/15, debt guarantees have increased by 215% indicating increased exposure to
contingent liability and if more guaranteed loans become callable, a heavier burden of repayment is
transferred to the government thereby exacerbating fiscal sustainability concerns.
viii. There is need for Pension statistics to deeply understand factors driving the pension bill and project
future expenditures. These statistics may include, but not limited to; the number of retirees in the
next 5 years, and the characteristics of the existing public sector workforce / demographic factors.
ix. Status of implementation of House resolutions have not been discussed. The resolutions included
the following:
a) That, by April 2021 when the national budget is tabled, a full quantification of Kenya’s Public
debt stock as defined under Article 214 of the Constitution be undertaken. This should
include debt disbursed and debt commitments already incurred.
b) That, a debt register should be submitted on quarterly basis to Parliament for Scrutiny.

UNPACKING THE 2022/23 BUDGET 32

 c) That, by April 2021 when the national budget is tabled, a progress report on all debt funded
projects be provided in order to enhance transparency and accountability.

UNPACKING THE 2022/23 BUDGET 33

ANNEX 1: LEGAL COMPLIANCE OF THE 2022/23 BUDGET
Item Constitution PFM Act PFM Standing Score Comments
2012 Regul- Orders (Out
ations of 5)
2015
1. Submission of estimates of 221(1) (3) 37(2) 235 (1) 4 out Submitted to
revenue and expenditure of the of 5 Parliament on 7th
national government, Parliament, April 2022.
and Judiciary for the next
financial year by 30th April
2. The ceilings approved in the 25(8) 27(4) 3 out Ceilings for
report on 2022 Budget Policy of 5 Executive have
Statement, shall serve as the been revised
basis of the expenditure ceilings upwards from
for the financial year and medium 2,005B to 2,034B
term. while Deficit from
846.1B to 862.5B.
DOCUMENTS SUPPORTING THE BUDGET ESTIMATES (BUDGET SUMMARY)
3. The preparation and submission 32(6) 5 out Information
of estimates shall be done of 5 provided
exclusively through prescribed
automated integrated financial
management systems (Itemized
Budget).
4. Submission of Budget Summary 38(a)(i) 3 out Some information
that includes a summary of of 5 provided, however,
budget policies on revenue, there is no
expenditure, debt, and deficit justification as to
financing. why the fiscal deficit
has been revised
upwards.
5. Submission of Budget Summary 15,38(a)(i)(ii) 26(1) 3 out Although provided
that includes an explanation of of 5 information on
how the budget relates to the borrowing indicates
fiscal responsibility principles it’s for development
and financial objectives funding, it’s not
clear for instance
why deficit of
862.5B is greater
than development
expenditure at
711.4B.
6. Submission of Budget Summary 25 (8), 2 out Although the
that includes a memorandum by 38(a)(iii) of 5 memorandum is
the cabinet secretary explaining provided, no
resolutions adopted by National demonstrable
Assembly on the BPS under practical steps have
section 25(7) have been taken been made to
account actualize the same
as most of the
timelines indicated
by the house have
not been adhered
to.

UNPACKING THE 2022/23 BUDGET 34

Item Constitution PFM Act PFM Standing Score Comments
2012 Regul- Orders (Out
ations of 5)
2015
There is a loop on
the
recommendations
touching on other
government
agencies other than
treasury and who
takes lead in
ensuring that they
are properly
reported to the
house as some
raise weighty
budget related
matters.
7. A list of all entities that receive 38(b)(i) 3 out Information provided.
funds appropriated from the of 5 However, the
budget of the national anchorage for
government continued operation
of Nairobi
Metropolitan Service
has not been
elaborated.
8. Estimates of revenue allocated 216(4) 38(b)(ii) 4 out No information on
to and expenditures projected of 5 Estimates of
from Equalization fund guided by Expenditure for FY
the CRA policy on marginalized 2022/23 from the
areas. Equalization fund.
This is a result of the
projects to be
financed under the
second policy have
not been identified.
9. Revenue allocations to county 202(2) 38(b)(iii) 5 out Information provided
governments including of 5
conditional and unconditional
grants
10. Estimated revenue by broad 38(b)(iv) 59(1) 5 out Information provided
economic classification and of 5
format
11. Estimated expenditure by vote & 38(b)(v) 32(4) 5 out Information provided
programme identifying both of 5
recurrent and development
expenditures
12. An estimate of budget deficit or 38(b)(vi) 5 out Information provided
Surplus and the medium term of 5
13. Information regarding loans 38(c) 5 out Information
made by the national government of 5 provided
including principal interest and
other charges to be received by

UNPACKING THE 2022/23 BUDGET 35

Item Constitution PFM Act PFM Standing Score Comments
2012 Regul- Orders (Out
ations of 5)
2015
the national government in
respect to those loans
14. Loans and guarantees to be paid 38(d) 5 out Information provided
by national government in the of 5
financial year respect to those
loans
15. A statement showing measures 38 (f) 1 out Information provided
taken by the national of 5 is insufficient. Some
government to implement any of the
recommendations made by the recommendations
national assembly with respect to made by the
budget for the previous years national assembly
seem to be moving
targets for National
Treasury
PUBLIC PARTICIPATION
16. Public participation on all public 201(a) 6(2) 2 out Citizen’s budget
matters including the publication of 5 uploaded on
of the Citizen’s budget National Treasury’s
Website. However,
no indication on the
extent to which
views of the public
were incorporated
into the finalization
of the estimates.

Total 75 %

UNPACKING THE 2022/23 BUDGET 36

 ANNEX 2: COMPLIANCE TO HOUSE RESOLUTIONS ON THE 2021 BUDGET POLICY STATEMENT
AND PAST BUDGET ESTIMATES
NATIONAL ASSEMBLY POLICY RESOLUTIONS Remarks
No. 2022 BUDGET POLICY STATEMENT

1 That, by 31st of March,2022 the National Treasury submits a report to the National Assembly Not Partly as the
on: timelines have elapsed.
a. the implementation status of the Big Four Agenda. The report should include information
on key milestones achieved, missed targets and a list of development projects to be
completed in FY 2022/23 as prioritized under the Public Investment Management.

b. Status report on the Credit Guarantee Scheme detailing amounts released and number
of beneficiaries. Complied

2 That, the National Treasury should in future prepare the Budget Policy Statement in line with Noted for future
the public debt ceiling. Compliance.

3 That, the National Treasury should expedite the finalization of the proposed Medium Term Partly Complied but
Revenue Strategy (MTRS) and submit it to the National Assembly by 30th April 2022. within set timelines

4 That, the National Treasury spearheads an evaluation of the emergency relief cash-transfer Not Complied but within
programme to households affected by drought under the Ministry of Public Service, Gender, timeliness
Senior Citizen Affairs and Special Programmes. The evaluation report be submitted to
Parliament within the next three months

5 That, a framework on the pre-approvals under Article 223 of the Constitution on Not Complied but within
Supplementary Budget be developed by the National Treasury, Controller of Budget and timelines
Office of the Auditor General and a report be submitted to Parliament within two months.

6 That, the State Department for ICT, and Innovation to spearhead the establishment of a Not Complied but within
multi-agency committee that should come up with a strategy on the rollout of the Digital timelines
Learning Programme and a report be submitted to Parliament within six months upon
approval of the 2022 BPS. The multi-agency committee should be made up of
representatives from the State Departments for Energy, State Department for Interior and
Co-ordination of National Government, Ministry of Education Research and Technology, and
the State Department for ICT and Innovation. Further, the strategy should incorporate
modalities of addressing challenges in settling of electricity bills in public learning schools.
7 That, the relocation to Konza Techno Polis of the relevant agencies domiciled in the State Not Complied but within
Department for ICT and Innovation such as the Kenya Film School, Kenya Film Classification timelines.
Board and the Kenya Film Commission to be effected by 31st December 2022 and the
budget savings from this be utilized to reduce the fiscal deficit.
8 That, the Ministry of Education through stakeholders’ engagements should spearhead the Not Complied but within
review of the capitation amount provided for public primary school learners and realign it to timelines.
support the implementation of the new curriculum without compromising the quality of
education. This report should be submitted to the National Assembly within two months.
9 That, within the next three months, the higher education sub sector should through the Not Complied but within
University Funding Board (UFB) establish and implement the university education data timelines.
management information system to promote accountability and improve management of
disbursed funds. This university data management system should also be linked to National
Education Management information systems (NEMIS) to create a pool of credible data for
the whole education sector.

UNPACKING THE 2022/23 BUDGET 37

 NATIONAL ASSEMBLY POLICY RESOLUTIONS Remarks
10 That, within the next two months, the State Department for Early Learning and Basic Partly Complied.
Education to submit a report to the National Assembly on the re-mapping of areas to benefit The school feeding
from the school feeding programme and the new re-mapping when approved should form programme fully
the basis of implementing programme in 2022/23 financial year. Further, for effective and transferred to NACONEK.
smooth implementation and management of this programme it should be fully transferred Remapping of needy
and be domiciled in the National Council for Nomadic Education in Kenya (NACONEK). areas yet to be made.
11 That, in the next financial year 2022/23 the One Village One Product (OVOP) initiative which Not Complied
will cost Kshs. 505 million should be implemented and be domiciled under the Kenya
Industrial Estate (KIE). The National Treasury should provide for the required resources.
12 That, the State Department for Labour should submit to Parliament the Labour Migration Bill Not Complied but within
within two months after the approval of the 2022 BPS, to address the matter of mistreatment timelines.
of Kenyan migrant workers in the Gulf Region. Cases of Kenyan migrant workers being
mistreated in the Gulf region have been on the rise yet there is no policy or targeted
interventions to address the same.
13 That, the police housing audit be fast-tracked by the Cabinet Secretaries for the State Not Complied but within
Department for Interior and State Department for Housing and Urban Development. The timelines.
report should be submitted to the National Assembly by 1st June 2022.
14 That, the Cabinet Secretary Ministry of Lands and Physical Planning should complete the Not Complied but within
development of an interim digital revenue collection system by 30th June 2022 and report timelines.
be submitted to Parliament. This is to ensure collection leakages are eliminated for the
Ministry to meet its revenue collection targets.
15 That, the State Department for Petroleum should review the Petroleum Development Fund Not Complied but within
Act, 1991 to provide for a Board to administer the funds and ring-fence the timelines.
allocations/appropriations for use in fuel stabilization by the end of FY 2022/2023.
16 That, the National Treasury, Kenya Revenue Authority (KRA), Commission on Revenue Partly complied as
Allocation (CRA) and the Council of Governors should fast-track the development of an process is ongoing
integrated County Revenue Management system for a unified revenue collection system for
all counties. The CRA should fast track the development of model tariffs and pricing policy
to guide counties to develop their own.
17 That, within the next one month, the Ministry of Health should submit an exit report for the Not Complied
leasing of the medical equipment programme. The report should contain among other things
the successes, challenges, and value for money of the programme and more particularly
detailing the Ministry’s option as regards the equipment when the contract comes to an end
later this year. It is critical that the persistent and pertinent issues surrounding this project
are addressed to guarantee smooth transition.
18 That, the Ministry of Health should ensure by 1st May 2022 the fragmented government Not Complied but within
sponsored social health covers such as Linda mama, insurance for Elderly and PWDs, Edu timelines.
Afya are harmonized into one single pool of resources for UHC. The savings from the
implementation of this policy should be used to reduce the fiscal deficit.
19 That, the Ministry of Health should by 1st September 2022 submit to Parliament a clear Not Complied but within
policy and criteria of classifying health facilities across the country. This will facilitate smooth timelines.
and seamless transfer of health facilities between the two levels of government.

FINANCIAL RESOLUTIONS ON THE 2022 BUDGET POLICY STATEMENT

20 THAT, the house approves the National Government Budget Ceiling for the 2022-2023 Not Complied
financial year at 2,075.011 billion of which Executive Kshs.
2,005.910 B
Of which Auditor General Kshs 6.378 B
Parliament Kshs. 50.220 B
Judiciary Kshs. 18.885 B

UNPACKING THE 2022/23 BUDGET 38

 NATIONAL ASSEMBLY POLICY RESOLUTIONS Remarks
21 THAT, the Committee is concerned that the BPS had proposed an overall deficit of 846 Complied.
billion which has a potential to breach the approved debt ceiling of Kshs. 9 trillion. The The National Treasury
committee therefore urges the National Treasury to amend the debt ceiling to enable them has submitted a debt
implement the budget as proposed, rationalize expenditure or implement revenue enhancing ceiling review instrument.
measures.
22 THAT, the allocation to the Equalization Fund of Kshs. 7.068 billion be approved as provided Complied.
in the Budget Policy Statement.

23 THAT, the County Government Equitable share shall amount to Kshs. 370 billion. Complied
24 THAT, county governments be allocated conditional grants of Kshs. 37 billion for FY Complied
2022/2023 to be disbursed in accordance with schedule 4A & B of the report of BAC
25 THAT, the resolutions form the basis for the preparation of the 2022-2023 budget estimates Partly Complied.

Annex 3
Recurrent /Current Appropriation in Aid
Votes Recurrent Estimates of Fiscal
Books2022/23 Revenue, Grants, Framework AIA
AIA and Loans Books 2022/23
AIA 2022/23
1011 Executive Office of the President 9,079,127,990 9,079,127,990
1021 State Department for Interior and Citizen Services 2,099,670,000 2,099,670,000
1064 State Department for Vocational and Technical Training 4,693,000,000 4,693,000,000
1065 State Department for University Education 42,379,478,998 42,379,478,998
1066 State Department for Early Learning & Basic Education 1,433,000,000 1,433,000,000
1071 The National Treasury 7,436,814,306 8,173,829,042
1081 Ministry of Health 19,665,000,000 19,665,000,000
1091 State Department for Infrastructure 67,821,000,000 84,762,700,957
1092 State Department for Transport 8,677,000,000 8,677,000,000
1093 State Department for Shipping and Maritime 1,606,000,000 1,606,000,000
1095 State Department for Public Works 912,000,000 912,000,000
1108 Ministry of Environment and Forestry 1,268,900,000 1,268,900,000
1109 Ministry of Water & Sanitation and Irrigation 2,388,500,000 2,388,500,000
1123 State Department for Broadcasting & Telecommunications 2,668,500,000 2,668,500,000
1152 Ministry of Energy 5,856,000,000 5,856,000,000
1162 State Department for Livestock. 1,084,000,000 1,084,000,000
1169 State Department for Crop Development & Agricultural 6,328,700,000 6,328,700,000
1173 State Department for Cooperatives 1,326,000,000 1,326,000,000
1175 State Department for Industrialization 972,000,000 972,000,000
1184 Ministry of Labour 913,420,000 913,420,000
1194 Ministry of Petroleum and Mining 5,257,000,000 5,257,000,000
1202 State Department for Tourism 7,232,380,000 7,232,380,000
1203 State Department for Wildlife 3,219,000,000 3,219,000,000
1213 State Department for Public Service 2,638,740,000 2,638,740,000
1252 State Law Office and Department of Justice 565,580,000 565,580,000
2091 Teachers Service Commission 547,000,000 547,000,000
Others 2,053,089,820 14,440,589,820
Total 210,120,901,114 240,187,116,807 210,121,000,000
Note: The difference between the total A in A recorded in the budget estimate books and Estimates of Revenue, Grants, and Loans books reflects the
fact that the Estimates of Revenue, Grants, and Loans book records the expected revenue collection from the Railway Development Levy (RDL),
Petroleum Development Levy (PDL) and Road Maintenance Levy (RML) rather than the expected expenditure by the respective MDAs.

UNPACKING THE 2022/23 BUDGET 39

 Development Appropriations in Aid
Votes Development Estimates of Fiscal Framework
Books 2022/23 A Revenue, Grants, AIA 2022/23
in A and Loans Books
AIA 2022/23
1011 Executive Office of the President 5,348,570,000 5,348,570,000
1071 The National Treasury 27,822,000,000 35,119,348,544
1091 State Department for Infrastructure 23,690,000,000 23,690,000,000
1093 State Department for Shipping and Maritime 689,000,000 689,000,000
1094 State Department for Housing & Urban Development 1,055,000,000 1,055,000,000
1095 State Department for Public Works 250,000,000 250,000,000
ICT& Innovation 330,000,000 330,000,000
1132 State Department for Sports 15,750,000,000 15,750,000,000
1152 Ministry of Energy 7,553,000,000 8,778,855,000
1194 Ministry of Petroleum and Mining 2,700,000,000 2,700,000,000
Others 20,549,713,163
Grants (20,838,827,972)
TOTAL AIA DEVELOPMENT 85,187,570,000 93,421,658,735 85,188,000,000
Note: The difference between the total A in A recorded in the budget estimate books and Estimates of Revenue, Grants, and Loans books reflects the
fact that the Estimates of Revenue, Grants, and Loans book records the expected revenue collection from the Railway Development Levy (RDL),
Petroleum Development Levy (PDL) and Road Maintenance Levy (RML) rather than the expected expenditure by the respective MDAs.

UNPACKING THE 2022/23 BUDGET 40