Gross Budgeted Expenditure and Revenue Collection 2011-2016

Post Date: 16 March 2018   |   Category: Budget   |   Hits: 674

What are factors that lead to the government being unable to meet its planned expenditure?  In each financial year the government through ministries, departments and agencies provides estimates of the intended expenditure for the implementation of the programmes and policies within the framework of the national goals such as Medium Term Plans and The Vision 2030. 

Analysis of the budget documents: Annual National Government Budget Implementation Review Report (BIRR) by the controller of budget and the Auditor General’s report 2015/16 reveal consistency in underperformance, the actual expenditure being below the target. For instance, in the fourth quarter of FY 2016/17 actual expenditure on development 69.9% of the budgeted expenditure, implying that out of Ksh10 that was intended to be spend on development only about Ksh 7 was actually spent. 

Implications of low absorption rates are numerous, for example, it could mean that programmes or projects that the government intended to implement have stalled and thus failure in meeting the national development agenda.

This week’s number focuses on trends in Gross Budgeted Expenditure, Budgeted Ordinary Revenue and Actual Total Ordinary Revenue. The analysis aims to find out any existing variance and establish their effect on the planned expenditure and overall absorption rates.

Trends in Gross Budgeted Expenditure and Revenue Collection

Source: Summary of the Report of the Auditor-General for the Year 2015/2016 and Economic Survey 2015 and 2017  

The chart above is a time series showing budget expenditure, budget revenue and the actual revenue that was realised. Gross Budgeted Expenditure values are obtained from Auditor General Report while the Budgeted Ordinary Revenue and Actual Total Revenue are sourced from Economic Survey 2015 and 2017. 

Gross Budgeted Expenditure represents the total budget that the government intends to spend for a given financial year, while Budgeted Ordinary Revenue represents the total revenue that the government estimates to receive from the tax sources as well as non tax sources.

The trends reveal a widening gap between the Gross Budget Expenditure and the Budgeted Ordinary Revenue implying that from the outset, the Kenyan government has been planning deficit financing, that is, a practice of spending more money than the level of revenue collection. The budget has been ambitious, and the deficit being planned to be financed through borrowing both domestically and foreign debt.  

In the financial year 2011/12 to 2015/16 the Gross Budget increased from Ksh 1.17 trillion to Ksh 2.25 trillion, representing an increase of 93%. Over the same period, the Budgeted Ordinary Revenue increased from Ksh 651 billion to Ksh 1.33 trillion, an estimated increase by 103%. 

However, despite high increases in the planned expenditure and projected revenues, the trend of the actual revenue collection has general been below, this implying that the effort towards meeting the budget expenditure suffers first from deficit financing and secondly from low actual revenue collection.

Number of the Week: Ksh 20,237  

  • The difference between gross budget and budgeted revenue collection was Ksh 519 billion in the FY 2011/12, this increased to Ksh 928 billion in FY 2015/16, representing 79% growth in the planned deficit. 
  • The Ksh 928 billion deficit in FY 2015/16 works out to Ksh 20,237 per every Kenyan.
  • Overall, the actual revenue collection has been lower than the target, in 2015/16, the collection was Ksh 1.34 trillion, 7% below what had been projected.