Thursday, June 10, 2010

Kenya's 1 trillion (KES) budget

The Kenyan budget is set to hit just under KES1 trillion. This sounds like many, many, many truckloads of cash. And it is. But that does not tell us much.

It helps to put this figure into perspective. In US dollars, this is about 12.2 billion. This is about equal to the budget of the US state of Maryland with a population of just 5.7 million, roughly equal to the population of greater Nairobi. If you were to divide 12.2 billion equally among every Kenyan alive today, every woman, man and child would get about $305 or KES 24,400 by today’s exchange rates. That is about $0.8 a day. Yes less than one dollar a day.

So I hope this provides some perspective.

My sense is that this is very little money; given the scale of problems we have to solve, many of which are seriously big-ticket items. But I think there are more fundamental problems beyond the budget totals. The structure, and I must confess I have not seen the detailed budget lines, is problematic and reflects a very old problem; big government. 68 % of the budget will be used to pay salaries for pubic servants and most of that cash is in the bag. The estimated deficit only applies to the so called development money. Very cleaver. As government, you cover your back side. The money for development (investment in growth and public services such schools, water, electrification, health) is a mere 32 %.

It is immediately easy to see why public servants will continue to be under employed. Yes they have their salaries but where are the resources they need to do their work? Let’s break the numbers a little further. The Ministry of Education will get the largest share (KES 140.5 billion) of budget allocations. 93.2 % of the budget will be used to finance re-current expenditure, a large part of which goes to pay salaries for teachers and ministry staff and the rest to provision of free primary and secondary education. These are all great and worthy reasons to spend my tax money as well as rack up public debt.

The education spending is 5.7 % of our GDP compared to China’s 3.48 % .We are investing more in education than China! Watch out dragon, we are coming for you! It is a widely held belief that public expenditure on education should account for at least 4.07 percent of GDP when the per capita GDP reaches $800-$1,000. Kenya’s GDP per capita is estimated at $857.

But here is what is troubling about the budget and expenditure structure. A back of the envelope calculation estimates that we have a total of 7,996,000 kids in school, including children enrolled in early childhood education programmes. 5,876, 000 are in primary school. So if we are spending KES on education, it breaks down to a per capita expenditure of KES 16,125.

I support universal and free access to education as a public policy. But clearly, we have left the money behind. Out of KES 16,125 of public expenditure on education, KES 15, 028 goes to t salaries and only KES 1,096 is used, you would hope, to provide books, equipment, and basic infrastructure such as school buildings. But as you very well know, the minster for education and his staff as well as teachers and suppliers have their dirty little fingers in the money bag.

You certainly cannot deliver quality education in a highly globalized and competitive world if you are not putting money behind it. I am convinced that Kenya’s future lies squarely on the quality of education we give our children. Our children must be equipped to compete. But KES 1,096 will not do.

I am not sure I know how to fix this. But it is not wrongheaded to suggest that a sizeable proportion public expenditure should go not to paying wages but investing in our future – our children.

How about a budget structure like 60 % on the students and 40 % on the operational expenses such as salaries? This would translate to a direct investment of KES 9,675 per child per year, up from KES 1,096.

Think about it.

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