DRAFT KWALE COUNTY BUDGET ESTIMATES FY2020/2021 FOREWORD This medium term expenditure framework (MTEF) budget for the period 2020/2021-2022/2023 is prepared in accordance to the provisions of Section 125 of the Public Finance Management Act 2012 and the requirements of the Constitution of Kenya 2010. It is prepared at a time when the country is facing a myriad of socio economic challenges following the emergence of COVID -19 which is spreading very fast with devastating effects. The country’s economic growth is diminishing with the latest projection showing a downward trend from 6.2 percent in 2018 to 5.4 percent in 2020. The preparation of the County Budget for FY 2020/2021 faced a number of challenges notably the public participation which could not be undertaken because of the restrictions arising from the COVID-19. The emergence of COVID-19 has posed challenges to conduct meetings where citizens can gather to deliberate on the draft budget for FY 2020/2021. However, the county government conducted public participation fora during preparation of the County Annual Development Plan and the County Fiscal Strategy Paper which are the key reference documents used in this FY 2020/2021 budget. The total anticipated revenues for this budget is Ksh 9,206,476,136. Development expenditure has been allocated Ksh 3,816,151,137 which translates to 41.5 percent of our total budgetary resources. The remaining Ksh 5,390,324,999 which is about 58.5 percent of our total revenues will be allocated to fund recurrent expenditures. The county government will evaluate risks which may affect this fiscal plan and formulate mitigation measures accordingly. BAKARI HASSAN SEBE CECM EXECUTIVE SERVICES, FINANCE & ECONOMIC PLANNING ………………………………………………………………………………………………………………………………………………………………………………………………………………………………… KWALE COUNTY TREASURY, 2020 i DRAFT KWALE COUNTY BUDGET ESTIMATES FY2020/2021 ACKNOWLEDGEMENT This document is prepared in consistent with the requirements of the Public Finance Management Act (PFMA), 2012 and the Constitution of Kenya 2020. This budget has been prepared at a time when the country is facing socio economic challenges due to the COVID-19 pandemic. The pandemic has affected the country’s economy negatively with the latest projections of economic growth dropping from 6.2 to 5.4 percent. This has the implication of reduced revenues and thereby funding to counties. The preparation of this budget faced challenges following the drastic control measures taken by the National Government to combat the spread of the disease. One of the measures taken was to abolish public gatherings. However, the County Government in a bid to conduct public participation, advertised in the daily papers calling for views and opinions on the draft budget FY which was made available in the County Government website. In all the years budget preparation has been through the collaborative efforts of all county departments and agencies. We are grateful to the County Executive Committee members led by H.E Governor and his deputy in giving the direction and wise advice in the finalization of this budget. Accounting officers played a crucial role in relaying information which informed a greater part of this budget. We appreciate their efforts. We convey our gratitude to all the Kwale citizens who participated in the two public deliberations exercises for the County Fiscal Strategy Paper and the County Annual Development Plan. The two documents were used as the main references in the preparation of this budget. Finally special thanks go to the Budget and Economic Planning Team of the County Treasury who spent substantial amount of time on content development, compilation, editing and finalization of this FY 2020/2021 County Budget. We are particularly grateful for their tireless effort in the timely preparation of this document. ALEX ONDUKO THOMAS CHIEF OFFICER FINANCE AND ECONOMIC PLANNING ………………………………………………………………………………………………………………………………………………………………………………………………………………………………… KWALE COUNTY TREASURY, 2020 ii DRAFT KWALE COUNTY BUDGET ESTIMATES FY2020/2021 EXECUTIVE SUMMARY FISCAL PLAN FY 2020/2021 The main reference documents used in the preparation of this FY 2020/2021 budget include the County Annual Development Plan (CADP) FY 2020/2021 and the latest 2020 County Fiscal Strategy Paper( CFSP). Considerations have also made on the conclusions and recommendations made in the latest 2019 County Budget Review and Outlook Paper for FY 2018/2019. Estimates of revenues applied in this budget are those proposed in the National Government Budget Policy statement (BPS) for the year 2020.The basis for allocation of resources among departments and county organs are the approved fiscal policies and financial objectives mentioned in the 2020 County Fiscal Strategy Paper and the development priorities contained in the approved County Annual Development Plan FY 2020/2021. FISCAL RESPONSIBILTY PRINCIPLES Section 107 of the Public Finance Management Act, 2012 sets the principles of fiscal responsibility. Subsection (2) states that: In managing the county government's public finances, the County Treasury shall enforce the following fiscal responsibility principles:- a) the county government's recurrent expenditure shall not exceed the county government's total revenue. The County Government has adhered to this principle by maintaining a recurrent expenditure of Ksh 5.39 Billion which is below the total revenue of Ksh9.2 Billion. b) over the medium term a minimum of thirty percent of the county government's budget shall be allocated to the development expenditure. The County Government expected expenditure on development programmes is pegged at Ksh.3.81Billion. This translates to about 41.5 percent of the County government's budget of Ksh9.2Billion. ………………………………………………………………………………………………………………………………………………………………………………………………………………………………… KWALE COUNTY TREASURY, 2020 iii DRAFT KWALE COUNTY BUDGET ESTIMATES FY2020/2021 c) the county government's expenditure on wages and benefits for its public officers shall not exceed a percentage of the county government's total revenues as prescribed by the County Executive member for finance in regulations and approved by the County Assembly. The threshold given in the Public Finance Management Regulations 2015 is 35 percent. The County government expected wage bill is at 34.6 percent of the total revenue. d) Over the medium term, the county government's borrowing shall be used only for the purpose of financing development expenditure and not for recurrent expenditure. The County Government does not intend to borrow as our budget is balanced and there is no budget deficit or financing gap. e) The rest of the principles have been taken into consideration as to forecasting of revenues, short term borrowing and containing fiscal risks through prudent expenditure management. RISKS TO THE FISCAL PLAN FY 2020/2021 Implementation of this FY 2020/2021 County fiscal plan and achievement of the County Strategic objectives may face the following challenges:- i. Delays in Exchequer releases by the Central Bank which may result in late implementation of projects. As it has happened in the recent years, this will increase the burden of managing our pending bills in future. ii. Underperformance of our own source revenue below the set target of Ksh 334 Million due to the effects of the COVID-19 pandemic on the economy. This will imply underfunding and postponement of some of county projects/programmes to the next financial year. ………………………………………………………………………………………………………………………………………………………………………………………………………………………………… KWALE COUNTY TREASURY, 2020 iv DRAFT KWALE COUNTY BUDGET ESTIMATES FY2020/2021 iii. Unpredictable weather conditions and the adverse effects of climate change may affect productivity and economic activities in the local economy. Adverse weather conditions like drought and heavy rainfall leading to floods may cause low agricultural productivity and food insecurity. This will call for emergency provisions in extreme cases of hunger and starvation. iv. Insecurity and unfavourable macroeconomic environment including increased inflation and food prices, unstable exchange rates, credit squeeze by commercial banks may impact savings and investment negatively as costs of production and costs of living increase. This will affect county economic activities and business in general and therefore low local incomes and reduced local revenue collection. v. Continued recruitment of employees due to expanded services may imply a bloated wage bill for the County thus reducing the allocation meant for development programmes and also operating above the threshold set for county governments wage bill ratio to total county revenues for the FY 2020/2021. vi. Uncertainties surrounding the allocation of revenues which may go down due to the effects of Covid-19 on the national economy. Further the drastic measures taken in combating the spread of the disease will have negative effect on general incomes and taxation in the country. Revenues to be collected will have the risk of being reduced. This will imply a general reduction in the country’s GDP and incomes and thereby monies allocated to counties. We will mitigate the major risks to our FY 2020/2021 fiscal plan through:- i. Strict adherence to fiscal responsibility principles and all the legislations related to planning, budgeting and public finance management in general to avoid delays in approval of funds release by the Controller of Budget and the disbursement of funds by the Central Bank. ii. Embarking on a programme of public