It may seem like budget season just ended in Kenya, but because of the elections in March 2013, next year’s budget process is already roaring.

Just a few weeks ago, Treasury released its opening salvo in the 2013/14 budget process, the Budget Review and Outlook Paper (BROP).

This document is intended to review last year’s budget performance and this year’s economy, and to provide background information for the coming budget.

The new PFM law mandates that the paper be produced by end of September, and made public by November. Treasury is to be commended for meeting this deadline.

Normally, the public would have from November to February to discuss this document prior to the release of the second major budget report from Treasury in the annual process: the Budget Policy Statement (BPS), a summary of the government’s planned budget.

This year, though, Treasury plans to release the budget synthesis early so that it can be reviewed before the term of the current parliament ends.

The BROP tells us that the Budget Policy Statement will be released on November 15 to parliament. This means it should be in the public domain by late November or early December.

In effect, this means that the public has relatively little time to think through the BROP before they must move on to debate the Budget Policy Statement.

Given this, it is worth asking what, if anything, the BROP tells us that the public should bother about. Here is a quick set of concerns:

Last year, revenue collections (including grants) were Ksh83 ($954 million) billion below target. That is a lot of money. It is hard to tell how worried we should be about it.

The Treasury says it represents lower tax revenue due to a weak economy, and a policy response to drought (duty exemptions for kerosene, wheat and maize to deal with food shortages).

However, there are also two non-tax areas where revenues were far below expected. First, external grants were only Ksh15.3 billion ($175 million) against a target of Ksh42 billion ($482 million).

And Appropriations-in-Aid (AiA, the name for fees charged by public institutions, like universities) were only Ksh57 billion ($655 million) against a target of Ksh80 billion ($919 million).

Why the shortfall? It would appear that the problem here is one of unrealistic expectations.

In 2010/11, the government actually collected almost Ksh19 billion ($218 million) in grants, and Ksh58 billion ($666 million) in AiA. It went on to set ambitious targets for 2011/2012 of Ksh42 and Ksh80 billion respectively.

This makes Treasury look unreasonably optimistic — expecting more than a doubling of grants, and an increase of 37 per cent in AiA in a single year.

These figures look particularly surprising when they are compared with the overall increase in revenues expected from all sources of only 23 per cent.

The public should be concerned when revenues are overestimated, because this can make it look like the deficit will be smaller than it is. This is one area to pay attention to during this year’s budget process.

On the spending side, development expenditure was below target by about Ksh85 billion ($977 million), almost a quarter of what was planned.

It appears that here too there were outsized ambitions. Actual development expenditure in 2010/2011 was Ksh219 billion ($2.5 billion), and planned development expenditure in 2011/2012 was Ksh385 billion ($4.4 billion), a 75 per cent increase in an area where procurement processes can make it difficult to suddenly spend large sums.

The general impression is that, on both the spending and revenue side, the budget for last year was unrealistic.

Another possibility, raised by Treasury, is that the problem is equally related to poor reporting by government agencies on actual spending and revenue collection.

This may well be, but if so, Treasury should tell us how they plan to fix that, since it is impossible to plan properly with dysfunctional reporting systems.

The BROP also puts particular emphasis on investment in irrigation to improve economic growth. I assume that this means government investing in irrigation infrastructure, which seems like a sensible thing to do to improve agricultural efficiency.

If so, this should show up as an increase in the development budget for agriculture.

When we look at the figures, there is an increase from Ksh26.4 billion ($302 million) this year to Ksh28 billion ($321 million) for 2013/14.

The only problem is that, assuming roughly 6 per cent inflation (as the BROP does), this is almost no real increase at all.

Over the medium-term, the situation is even worse: adjusted for inflation, agricultural spending is falling through 2015/16. Can agriculture really take off without a big increase in capital spending? This is another question to ask when the BPS comes.

Finally, the BROP promises extensive capacity building for counties this year to ease devolution, but provides no details on the costs or process. Citizens should demand this information as the budget process unfolds

Dr Jason Lakin is a programme officer and research fellow at the International Budget Partnership. [email protected]