Highlights of the 2023 Budget Review and Outlook Paper (BROP)

The Budget Review and Outlook Paper (BROP) is a budget document produced and published by both national and county governments every year. The Public Finance Management Act requires the BROP should be tabled in Parliament by 21st October each year and made public not later than 5th November each year.

Why is the BROP important

• BROPs function as a year-end report, providing an assessment of budget performance from the previous financial year.
• They also provide an update on the government’s fiscal position for the first quarter of the current financial year and update on key economic indicators that affect revenue generation and expenditure.
• Finally, they provide provisional sector allocations for the next financial year that ?play a key role in the Sector Working Groups before they are approved in the Budget Policy Statement.

5 Highlights of the 2023 Budget Review and Outlook Paper (BROP)

The 2022/23 budget deficit fell by Kshs. 8.9 Billion, resulting in lower than anticipated borrowing.

Total expenditure fell below target by Kshs. 145.6 billion, due to underspending in both recurrent and development expenditure. This was on account of lower spending on operations and maintenance, delayed disbursement of project funds and a shortfall in domestic borrowing. Revenue collection was also below 5% target on account of lower than expected revenue from Import Duty, Excise Duty, PAYE and VAT. The amount borrowed in 2022/23 subsequently fell by Ksh. 75 billion.

The State Department of Water and Sanitation and the National Treasury are among the ministries with the highest expenditure deviations in FY 2022/23.

Expenditure deviations signal an inability to spend the entirety of an allocated budget within the FY. Deviations can be due to a number of factors, although none are given in the BROP 2023. Large negative differences between actual and targeted expenditure often mean that budget implementation in related sectors and items is affected. The high deviation in the State Department of Water and Sanitation is particularly worrying, given the 3.7 million households that still lack at least on basic drinking water service (KDHS, 2022).

Public debt projected to hit 10.6 trillion in 2023/24.

The stock of public debt is expected to increase from Ksh. 9.76 trillion to Ksh. 10.6 trillion between 2022/23 and 2023/24. This would bring the public debt to GDP ratio to 65.9%, more that 10% above the legal threshold of 55%. In addition, the budget deficit of the FY 2023/24 is expected to be 16% higher than anticipated in the approved budget increasing the borrowing requirement for the FY. In line with recent pronouncements by the Executive, this is expected to be financed with additional foreign debt.

100% of county revenues were disbursed, including balanced brought forward from FY2021/22.

Energy, Education and Social Protection sectors to receive a smaller share of the budget in 2024/25.

Link to the 2023 Budget Review and outlook paper https://shorturl.at/LQR58