Alex Tamei
Introduction
Kenya's budget-making process has traditionally been driven by a focus on economic growth and fiscal consolidation. The government primarily aims to increase revenues, manage public debt, and stimulate economic development through various fiscal policies. However, this approach has increasingly become problematic, as evidenced by the potential socio-economic impacts of the proposed Finance Bill 2024.[i]The recent proposals in the now rejected Finance Bill 2024, such as increased taxation on housing savings and digital services, sanitary towels, cancer medication and others alike shows how the government is obviously tone deaf to the plight of the common mwananchi.[ii] The 2024 Finance Bill simply crystallises what has been a long time coming. For context, let's rewind time a little.
Back in time
Between February and July 2022, overall inflation went up from 5.08% to 8.3%, while food inflation spiked even higher to 15.3% from 8.69%. The causes included rising global commodity prices, currency depreciation, and tax hikes aimed at reducing fiscal deficits.[iii] This surge in food prices severely impacted the right to food security and freedom from hunger, especially for Kenya's poor and vulnerable populations.[iv] More people were forced to skip meals, eat smaller portions, reduce food purchases, and cut back on nutritious items. Consequently, the rights to education and health were also undermined.[v] When President William Ruto's administration took over in August 2022 amid the pandemic's economic aftermath and global supply shocks, urgent liquidity needs prompted austerity measures.[vi] These included slashing subsidies,[vii] overhauling higher education funding,[viii] and drastically increasing taxation through the 2023/24 Finance Bill.[ix] This liquidity push aimed to service the mounting debt burden, especially the looming 2024 Eurobond maturity.[x] One of the most impactful tax measures was the introduction of a 16% VAT on fuel products like cooking gas, kerosene and petrol in 2023.[xi] This escalated the prices of essential commodities even higher, deepening inequality and poverty while reducing economic activity – burdening many Kenyans who rely heavily on these fuel products.[xii]Why, despite overwhelming evidence, does the government persist in disregarding its people's rights in budgeting?
The root of the problem
The answer is simple really, the economists driving the state's monetary and economic policy look at numbers. Not at people. The Public Finance Management Act obligates the National Government to ensure that its financing needs and payment obligations are met at the lowest possible cost in the market which is consistent with a prudent degree of risk, while ensuring that the overall level of public debt is sustainable.[xiii]However, the state is completely disregarding the public debt ceiling. Barely three years after the ceiling had been increased from KES 6 trillion to KES 9 trillion in October 2019, the debt cap was raised again on June 7, 2022.[xiv]At the height of the COVID 19 pandemic, money from a loan package gave rise to concerns by the citizenry that the issuance of this loan came despite a number of accountability issues relating to the (mis)management of earlier loans.[xv]Manifestly, whatever the state's metric for "sustainable" is , it almost definitely does not enshrine concern for the Kenyan citizens' rights.
Rights based budgeting
Amartya Sen's concept of "Development as Freedom" provides a compelling alternative framework. Sen argues that true development should be measured by the expansion of human freedoms and capabilities, rather than just economic indicators.[xvi] This approach emphasises the importance of education, healthcare, political rights, and economic opportunities in enhancing people's ability to lead lives they have reason to value.[xvii]
Rights-based budgeting would fundamentally transform Kenya's fiscal approach, prioritising human rights and social welfare over narrow economic metrics. Under this model, the government would assess budget proposals based on their impact on citizens' fundamental rights, including access to food, healthcare, education, and housing. For instance, instead of arbitrarily increasing taxes on essential goods to meet revenue targets, policymakers would first consider how such measures affect the right to an adequate standard of living. The budgeting process would involve extensive consultation with marginalised communities, civil society organisations, and human rights experts to ensure that fiscal decisions align with constitutional and international human rights obligations. Crucially, this approach would require robust transparency and accountability mechanisms, allowing citizens to track how public funds are allocated and spent in relation to rights outcomes. By shifting the focus from abstract economic indicators to tangible improvements in people's lives, rights-based budgeting could help address Kenya's persistent inequality, poverty, and social exclusion. It would compel the government to balance fiscal consolidation with its duty to progressively realise economic and social rights, potentially leading to more sustainable and inclusive development in the long term.
In lieu of a conclusion
In essence, as at the writing of this piece, there have been wide-spread protests against the 2024 Finance Bill. Detractors have painted the protests as taking vision, nothing they are walking towards, only against. This article intends simply, to put into words what is clear in the mind of every Kenyan. The transition to rights-based budgeting in Kenya is not just a matter of changing fiscal policies; it's about reimagining the very purpose of economic governance.
[i] Bowman's, 'Analysis of the Finance Bill, 2024' 2 May 2024.
[ii] Bowman's, 'Analysis of the Finance Bill, 2024' 2 May 2024.
[iii] Kenya National Bureau of Statistics, 'Consumer price indices and inflation rates', February to July 2022.
[iv] Omondi and PA Onono, 'Impact of debt servicing on social spending and wellbeing of low-income household in Kenya' 24 March 2022.
[v] Omondi and Onono, 'Impact of debt servicing on social spending and wellbeing of low-income household in Kenya'.
[vi]Evelyne Musambi and Charles Gitonga, 'William Ruto: New Kenya president's bold move to scrap subsidies' BBC News Nairobi, 15 September 2022. - < https://www.bbc.com/news/world-africa-62916580 > on 8 August 2024.
[vii] Evelyne Musambi and Charles Gitonga, 'William Ruto: New Kenya president's bold move to scrap subsidies' BBC News Nairobi, 15 September 2022. - < https://www.bbc.com/news/world-africa-62916580 > on 8 August 2024
[viii] James Mbaka, 'Explainer: How New Higher Education Funding model will work' The Star, 31 July 2023.- < https://www.the-star.co.ke/news/realtime/2023-07-31-explainer-how-new-higher-education-funding-model-will-work/#google_vignette > on 8 August 2023
[ix] Charles Jaika Magotzwi, 'The finance bill of Kenya 2023 and its implications on financial inclusion,' ICJ Kenya, June 6, 2023. - < https://icj-kenya.org/news/the-finance-bill-of-kenya-2023-and-its-implications-on-financial-inclusion/> on 8 August 2024
[x] Economist intelligence, 'Kenya faces a potential debt repayment crunch in 2024', Tuesday, 28 March 2023.
[xi] Business Daily, 'How 16pc fuel tax will hit households, motorists from July' Thursday 22 June 2023.
[xii] Business Daily, 'How 16pc fuel tax will hit households, motorists from July'.
[xiii] Public Finance Management Act, Section 50(1).
[xiv] Edwin Mutai, 'MPs increase debt ceiling to Sh10trn', Business Daily, 7 June 2022.
[xv] S Masinde, 'Transparency International –Kenya, Fight on Corruption is Panacea to public debt
crisis' <https://tikenya.org/fight-on-corruption-is-panacea-to-public-debt-crisis/> on 29 August 2024.
[xvi] Amartya Sen, 'Development as Freedom', Oxford University Press, 1999.
[xvii] Sen, 'Development as Freedom'.
