OFFICE OF THE DEPUTY PRIME MINISTER AND MINISTER FOR FINANCE

STATEMENT BY THE DEPUTY PRIME MINISTER AND MINISTER FOR FINANCE ON THE FY 2011/2012 BUDGET.
2nd June 2011.
There has been much debate over the budget and the budget process and I have deemed it necessary to clarify some
of the issues that have been raised surrounding this year’s budget. As I do so, let me reiterate three things. Firstly,
Treasury and myself are totally committed to the implementation of the new constitution. Secondly, The Treasury is
equally committed to transparency in Public Financial Management. Thirdly, The Treasury, ALSO as the statutory
custodian of the macro-economic environment of this nation, is duty-bound to exercise utmost care and diligence in
the management of our economy. It is indeed the Treasury’s considered view that both the letter and the spirit of the
new constitution are equally important.

It is instructive to note that Chapter 221 of the New Constitution was indeed one of the proposals of the Treasury to
the CoE. This was made in the spirit of ensuring that all public and parliamentary participation into the budget
making processes would be exhausted before the beginning of the new financial year so as to ensure predictability
and efficiency of Government operations from the beginning of the financial year.

It is also important that the public understands the process of coming up with the national budget. The following are
the critical steps in our budget making process:-

1. The first step is the review of strategic plans and ministerial public expenditure; this is done by the
ministries between July and August;
2. Launch of Sector Working Groups; this is done in the month of September;
3. Finalization of the Budget Outlook paper and issuing of sector ceilings; this is done in the month of
October;
4. Ministerial ceilings; this is done by the respective Sector Working Groups in November and December.
The ministry of Finance then consolidates and communicates the respective ceilings to Ministries.
5. Allocation to programs and projects; this is done by the respective ministries immediately after receiving
the ministerial ceilings
6. Public Sector Hearings and finalization of sector budget proposals; this is usually done between November
and December. The public hearings allow for public participation. Sector budget proposals include
feedback from the public
7. Preparation of the itemized budget; this is done in the month of March.
8. Preparation of the Budget Policy Statement (BPS); this is prepared by Treasury and submitted to
Parliament by 21st March.
9. Feedback on BPS by Parliament. The debate on the BPS was concluded on 3rd May 2011.

The budget making process outlined above usually takes 10 – 11 months. Let us also remember that the budget cycle
under the old constitution and the promulgation of the new Constitution have met each other halfway. Given the
length of time it takes to formulate the budget, there probably should have been transitional clauses due to the fact
that the Budget date had been moved forward by 2 months. As we move towards implementing our new and desired
Constitution we must also take cognizance of our need to transit seamlessly into the new order.

In the spirit of the new Constitution, we fast tracked the budget process and recorded the following achievements:-

 First, line ministries prepared Budget Proposals based on 10 sectors. These proposals were shared with the
public during the Public Sector Hearings, which were held on January 12-14, 2011 at the KICC. Typically
under the old budget process, we would have held the Sector Hearings around mid-March.
 Second, we used the Sector Budget Proposals, to prepare the Budget Policy Statement (BPS) in accordance
with the requirements of the Fiscal Management Act, 2009. The BPS has been discussed with the relevant
departmental Committees of Parliament and this gave Parliament an opportunity to contribute towards the
Government’s Medium Term Policy Priorities, and spending plans. The debate on the BPS was concluded
on 3rd May 2011. In the spirit of the new Constitution, we held consultative meetings prior to the
submission of the BPS, with the Judiciary and Parliament to agree on their overall funding levels after
having taken due regard to the projected resources.

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  Third, with the submission of the BPS we communicated to line ministries their ceilings to enable them to
prepare and submit detailed Budget Proposals. These were subsequently submitted to the Treasury by 30th
March 2011 and the ministerial budget proposals were reviewed to ensure that they were in line with the
national policy objectives.
 Finally, the estimates for both development and recurrent expenditure were prepared for submission to
Parliament on the 31st of May 2011 in accordance with our understanding with the Parliamentary Budget
Committee. These estimates are available to the public are mere summaries of detailed expenditure of
every single department of Government running into thousands of pages. It is important to note that this
would not be possible without the dedicated, professional, qualified and selfless team at The Treasury
working round the clock to ensure that every single item of every single department is included in the
estimates. I commend them for working selflessly and thanklessly behind the scenes to ensure that the
budget is delivered to the people of Kenya.

These are the core responsibilities of the Treasury and of which I am proud to report that with the support of my
hard-working team, we have already delivered. In addition and in moving with spirit of the new constitution,
Treasury, taking advantage of the huge investment by the Government of Kenya, in the fibre optic cable spread
throughout the country is undertaking, through the IFMIS programme, the digitization of the process of budget
making. Under the current financial year, we intend to roll out a pilot in 10 ministries, with the view to roll out the
same, throughout the national government and eventually extend this to the future county governments. This will
ensure that after this transitional stage, the Government of Kenya will be in a position to meet not only the
constitutionally laid down guidelines, but the transparency required under the yet to be approved Public Financial
Management bill. The budget speech is the culmination of the entire budget making processes but in itself is not the
budget – the budget is contained in the estimates which are in front of us today. The budget speech simply highlights
the key areas of focus that would be of interest to the public.

In this respect, and given the need to ensure macro-economic stability and smooth transition from the old
constitution to the new one, from a purely practical perspective, it was not possible to present these estimates to
parliament two months before the end of the financial year.

In addition to the above consultative steps, we took the following measures to further ensure a greater level of public
participation in the budget making progress.

 We put up an advertisement in the newspaper asking for public input on the budget;
 We also put up a page on the Treasury website for the same purpose

Apart from these, I also took the liberty to include the growing number of tech savvy Kenyans who are active on
social media through an online suggestion form and a Facebook and Twitter campaign on my official pages.
Through these tweets, Facebook wall posts, emails and blogs, we received more than 3,000 submissions and I would
like to take this opportunity to thank all those who performed this most patriotic duty.

In effect, the only challenge that we are facing this year is that the period for parliament to interrogate the budget
will be deferred from two months before the end of the financial year to after the budget speech, if parliament, in its
wisdom will deem that necessary.

Our commitment to improving the lives of our people is steadfast and will not be affected in any way. In this year’s
budget, The Government has given priority to education, water, youth empowerment and food security. At the same
time, our focus on infrastructure that we have prioritized in the preceding budgets has continued in this year’s
budget. Cushioning the most vulnerable sections of our society and regional equality in development, just like in the
previous years have been given special consideration. Resettlement of IDPs, which we have all agreed is an issue
that we have to finalize this year, has been given adequate consideration.

In addition, cognisant of the critical importance of implementing the new constitution and preparing for the next
General Election, we have committed resources that will ensure that these two processes progress smoothly.

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Focus on the Expenditures.

To ensure pro - poor growth and sustainable development, the 2011/12 Budget will continue to focus on key
priorities as a basis for allocation of resources. These include improving access, transition rate, and quality of
education; enhancing efficient and a high quality health system, ensuring security for all persons and property;
empowering the youth and vulnerable members of the society by engaging them in gainful employment and wealth
creation; implementation of the New Constitution and promoting food security.

Over the years, the Government has continued to shift more resources in infrastructure and social spending. For
instance, in the FY2011/2012 Budget, we will increase expenditure on infrastructure by 35.53% from 165.811B in
the FY 2010/11 to 221.411B in the FY2011/12. This amount of 221.4B is an increase of 1,304% from Government
spending on infrastructure in the 2002/03FY (15.772B). During my previous budgets, and through the Economic
Stimulus Package again living within the spirit of a constitution that had not yet been enacted, but with the
understanding of the wishes of many millions in Kenya, we had commenced the process of devolution of resources
by identifying programs at the constituency level and funding them. Through the ESP we have made major gains in
Agriculture & Fisheries, Health Care, Education and Trade in each and every part of the country.

Furthermore, in the FY2011/2012 budget, we have managed to accommodate key national strategic priorities in the
areas of education, health, infrastructure (rail and roads), tourism, internal security and agriculture, and cushioned
the poor. Other areas that we have focused on include empowerment of the youth and job creation, implementation
of the new constitution, and preparatory activities for the next elections.

These strategic interventions, some of which are highlighted in the attached annexes, are clear proof of the
Government’s commitment to improve the lives of our people.

Let me at this stage thank my staff at Treasury, led by the Permanent Secretary for working extra hard and for long
hours that have always extended late into the night to produce these estimates which we have already forwarded to
parliament. My Assistant Minister and I are the only politicians in this building. Whatever our political inclinations,
we are here today and gone tomorrow. The technocrats and professionals who remain in this building are committed
and dedicated servants of this Republic who should be treated with dignity and civility.

I would like to express my deep appreciation to H.E .President Mwai Kibaki for providing exemplary leadership
that saw the economy grow from below 1% in 2003 to over 7 percent in 2007 before the global financial crisis and
the post election violence resulted in a sharp deceleration of growth to 1.7 percent in 2008. Since that time, however,
under his continued strong leadership, the economy rebounded sharply to about 5.7 percent in 2010. This
performance reflects the remarkable rise in the development expenditure from Kshs 49.7 Billion in 2002/2003 to
Ksh 303.8 Billion in 2010/2011. By any standards for that period, an increase of expenditure on roads from Ksh 5.14
Billion in 2002 to 66.5 Billion in 2010/11, Energy spending from 6.7 Billion in FY2002/03 to KSHs. 32.6 Billion in
the FY 2010/2011, Water from 2.3 Billion in FY 2002/2001 to 32.78 Billion FY 20010/2011, Education from 4.7
Billion in the FY2002/2003 to 9.9 Billion FY 2010/2011, and, Health from 4.8 Billion in the FY 2002/2003 to 20.1
Billion in FY 2010/2011 is nothing short of a development showcase. Over this period, our President may not have
said much, but plenty was done. This year, the government has proposed a total development budget of Ksh 398.6
Billion.

Ultimately, we have done our part and I would like to assure Kenyans that I and the Treasury are committed to
implementing the constitution. To this end, we have published the Independent Offices Bill which is now ready for
tabling in Parliament, the Commission on Revenue Allocation is already in place while the relevant bill will shortly
be discussed in Cabinet. A layman’s draft of a comprehensive Public Financial management Bill, has been posted on
the Treasury Website in order to comply with the constitutional requirement for public participation in the drafting
of bills. We are also currently working on the required amendments to the Public Audit act which will be presented
to the Attorney General in due course.

Despite challenges, we have done our part, and we now leave it to parliament to do its work. In considering this
matter, however, we would like to urge parliament to take cognizance of the following:-

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 1. Kenya is not only a member of but also a major stakeholder in the East African Community. Kenya stands
to benefit a lot from a vibrant inclusive East African community.
2. At a time when the country is grappling with the consequences of the rising fuel prices in particular and
costs of living in general, we should all look for solutions that ensure efficient government operations and
an environment that promotes investor and consumer confidence
3. This budget sets aside substantial funds towards the commissions that are responsible for implementing the
new constitution.

In conclusion, the Treasury acknowledges that the public has a participatory role in budgetary formulation. The
Treasury also recognizes that parliament has an oversight role within the same process. This can never be in dispute.
By the same token, the Executive, through Treasury has, as articulated under the Fourth Schedule of the Constitution
of Kenya, a cardinal role to ensure that there exists a macro-economic environment that will ensure stability,
sustainability, continuity and economic growth. These two roles need to be complimentary and mutually-supporting,
not antagonistic and discordant, and in the spirit of shared responsibility.

On our part, we have concluded the work and prepared the estimates which contain the budgetary provisions on
revenue and expenditure. Since this debate started, I have personally refrained from engaging publically on this
matter so as to enable my officers to conclude their work which they now have done.

On a light note, by presenting these estimates to parliament at a time when we are implementing the new
constitution, I am proud that my first duty as the first and only Cabinet Secretary under the new dispensation is to
present a Ksh 1.155 Trillion budget, the largest in the history of our country.

The public should also understand that with regard to the 2011/2012 budget we may have not lived to the strict letter
of the constitution with regard to the timelines but more than any other institution, we at The Treasury, have
operated in the spirit of the new constitution.

These estimates are available to the public on the Treasury website and social media. We will also make the
proposed Public Financial Management Bill available to the public. We are urging the public to take this opportunity
to look at these documents and ensure that they participate in this important process to ensure that we have an all-
inclusive process of budget making and development of our country.

THANK YOU and God bless you all.

Hon. Uhuru Kenyatta, EGH, MP

DEPUTY PRIME MINISTER AND MINISTER FOR FINANCE

-Ends-

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Annexes.

Annex 1. Highlights of Budgetary Proposals.

The following are some of the highlights in our budgetary proposals:-

1. Ksh 1.315 Billion for construction of water harvesting systems in 10 primary schools per constituency at a
cost of Ksh 250,000 per school.
2. Ksh 840 Million to provide bursaries for 200 additional poor/orphaned children per constituency at a cost
of Ksh 20,000 per child.
3. Ksh 1.1 Billion for construction of 15 water harvesting pans (100,000 Cubic Metres capacity) for each
non-ASAL constituency at a cost of Ksh 800,000 each
4. Ksh 1.05 Billion for construction of 20 water harvesting pans (100,000 Cubic Metres capacity) for each
ASAL constituency at a cost of Ksh 1.5 Million each
5. Ksh 210 Million to establish a digital village in each constituency
6. Additional Kshs 1 Billion for the second phase of funding for the Small and Medium Enterprises program
7. Ksh 1.3 Billion for expanding irrigation by 11,000 acres in existing schemes, Ksh 4.3 Billion to bring new
irrigation schemes covering 16,000 acres and Ksh 600 Million to design 91,000 new irrigation schemes.
8. Ksh 135 Million to implement cold storage facilities in 120 constituencies to compliment the successes
realized when we introduced fish ponds in the 2009/2010 budget under the Economic Stimulus Package.
9. Ksh 385 Million to expand coverage from 10 to 30 households for the Disabled Persons safety net program,
Ksh 260 Million to expand the Orphans and Vulnerable Children safety net from 60 to 72 Districts, Ksh
240 Million to expand the cash transfer for senior citizens from 44 to 72 Districts, Ksh 230 Million to
adjust benefits from Ksh 1,500 to Ksh 2,000 for the same
10. Ksh 845 Million for the purchase of 2 gunny bags per household for farming in the slum areas.
11. Ksh 300 Million to purchase sanitary pads for girls in primary schools across the country
12. Ksh 100 Million to develop child protection system and give support to children institutions
13. Ksh 5.53 Billion to extend a grant of Ksh 15 Million per constituency to complete ongoing projects and
cover CDF projects arrears amounting to Ksh 1.8 Billion
14. Ksh 2 Billion capital grant to co-operative societies to clear outstanding coffee debts.
15. Ksh 1.85 Billion to expand and/or modernize commuter rail services, Ksh 1 Billion to upgrade Thika-
Nairobi Commuter rail and Ksh 3.25 Billion for the Mombasa-Malaba standard gauge railway.
16. Ksh 4.157 Billion for the final resettlement of IDP’s.
17. Ksh 3.34 Billion for the payment of pension dues for retired teachers between 1997 and 2003.
18. Ksh 5.5 Billion for preparation of the 2012 General Election
19. KShs. 1.15 billion for Police Recruitment.

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Annex 2 – Sector Allocations.

Sector Allocations increases

The FY2011/12 Budget has provided an overall increase of Ksh. 131.5 billion in funding to all sectors with the
following sectors recording significant increases in funding:

1. Physical Infrastructure - Allocations went up by Kshs. 55.6 billion from KSh.165.8B in FY2010/11 to
KSh. 221.4B in FY2011/12
2. Public Administration & International Relations - We have increased allocations to the Public
Administration and International Relations sector by KSh. 35.4 billion from KSh. 77.5b in the last financial
year to KSh. 112.9b in the FY2011/12.
3. Governance, Justice, Law and Order - Allocations increased by KShs. 22.8 billion from (from KSh.
98.7b in FY2010/11 to KSh. 121.5b in FY2011/12)
4. Human Resource Development - Increased allocations by KShs 13.2 billion. (from KSh. 201.7b in
FY2010/11 to KSh. 21.9b in FY2011/12)
5. Research, Innovation and Technology - allocations increased by KShs. KSh. 9.6 billion (from KSh.
65.8b in FY2010/11 to 75.5b in FY2011/12).
6. Environment, water and Sanitation - Allocations have increased by KShs. 6.6 billion (from KSh. 50.3b
in FY2010/11 to KSh. 56.9b in FY2011/12).

The rest of the sectors recorded a decline in funding as a result of exclusion of the once-off expenditures which had
been included in the 2010/11 Supplementary Estimates.

To respond more swiftly on the issue of irrigation, KSh. 8.6 billion budget for irrigation is being held in MoF. We
have also held, 4.2 billion in respect of resettlement of IDPs.

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