COUNTY GOVERNMENT OF WAJIR DEPARTMENT OF FINANCE AND ECONOMIC PLANNING COUNTY BUDGET REVIEW AND OUTLOOK PAPER SEPTEMBER 2024 © County Budget Review and Outlook Paper (CBROP) 2024 To Obtain copies of the document, please contact: County Chief Officer, Economic planning, budget and Statistics Wajir County P.O BOX 9 – 70200 Wajir The document is also available on the website at: www.wajir.go.ke http://www.wajir.go.ke/ FOREWARD The County Budget Review and Outlook Paper (CBROP) 2024 has been prepared in line with section 118 of the Public Finance Management (PFM) Act 2012 which requires the county government to prepare a budget review and outlook paper in respect for each financial year and submit it to the County Executive Committee by 30th September. The 2024 CBROP has been aligned to the key county and national policy documents such as the County Integrated Development Plan (CIDP), County Annual Development Plan, The national medium term plan (MTP 2023- 27), the vision 2030 and the governor’s manifesto” that aims at economic transformation and inclusive growth. This implies that the County Programs and projects support the BETA Agenda. The projections for the MTEF period 2025/26- 2027/28. CBROP 2024 reviews fiscal performance of the county for the FY 2023/24 against the budget appropriation and as well provides information on changes in forecasts as indicated in the County Fiscal Strategy Paper (CFSP) 2024 and how actual financial performance for the previous financial year may have affected compliance with the fiscal responsibility principles, or the county financial objectives for that year. It further gives reasons for any deviation from the county’s financial objectives in the latest fiscal strategy paper (February, 2024) and the proposals to address the deviations. The updated economic and financial outlook presented in this paper sets out the broad fiscal parameters for preparation of the next budget (2025/26). In particular, the provisional ceilings presented are intended to act as a guide to sector working groups and the departments preparing their budgets. This policy paper will be useful in enhancing financial discipline and fiscal responsibilities outlined in section 107 of the PFM act 2012 and will contribute towards the realization of the aspiration of the residents of the county. CPA MOHAMED HASSAN HUSSEIN COUNTY EXECUTIVE MEMBER FINANCE AND ECONOMIC PLANNING Abbreviations and Acronyms AiA Appropriation-In-Aid ASAL Arid and Semi-Arid Land BPS Budget Policy Statement CA County Assembly CBROP County Budget Review and Outlook Paper CFSP County Fiscal Strategy Paper CG County Government CIDP County Integrated Development Plan FY Financial Year GDP Gross Domestic Product GoK Government of Kenya IFMIS Integrated Financial Management Information System MTEF Medium Term Expenditure Framework MTP Medium Term Plan PERs Public Expenditure Review PFM Public Finance Management PPP Public Private Partnership SWG Sector Working Groups OSR Own Source Revenue Table of Content FOREWARD ................................................................................................................................................... 3 Abbreviations and Acronyms ........................................................................................................................ 4 1. INTRODUCTION ..................................................................................................................................... 7 Background ............................................................................................................................................... 7 Objective of CBROP ................................................................................................................................... 7 Why to prepare CBROP ............................................................................................................................. 8 II. Review of Fiscal Performance in FY 2023/24 ...................................................................................... 9 Overview ................................................................................................................................................... 9 Fiscal Performance FY 2023/24 .............................................................................................................. 10 Revenue .............................................................................................................................................. 13 Expenditure ......................................................................................................................................... 13 Adherence to the Fiscal Responsibility principles ............................................................................... 15 Overall Balance and financing ............................................................................................................. 17 Implication of FY 2021/2022- 2022/2023 fiscal performance ................................................................ 18 III. Recent Economic Development and Outlook ...................................................................................... 20 Recent Economic Developments ............................................................................................................ 20 Overview of recent developments ..................................................................................................... 28 Progress report on budget implementation: ...................................................................................... 32 Medium Term Fiscal Framework ............................................................................................................ 34 Risks to the outlook ................................................................................................................................ 36 IV. Resource Allocation Framework ............................................................................................................ 38 Implementation of 2024/25 Budget ....................................................................................................... 38 Medium Term Fiscal Projections ............................................................................................................. 39 Medium-Term Expenditure Framework ................................................................................................. 40 V. Medium Term Revenue Strategy ........................................................................................................ 41 LIST OF TABLES Table 1: Fiscal Performance by Broad Economic Classification FY 2023/24(KES. Million) ........................ 10 Table 2: Recurrent Estimates by Departments/ Entities FY 2023/24 (KES.) .............................................. 11 Table 3: Development Estimates by Departments FY 2023/24 (KES.) ..................................................... 12 Table 4: Expenditure by departments 2023/2024 (KES. Million)................................................................ 14 Table 5: Actual Receipts FY 2023-2024 ...................................................................................................... 17 Table 6: Sectoral GDP Performance ........................................................................................................... 23 Table 7: GCP by economic activity at current prices 2022 ....................................................................... 30 Table 8: Own Source Revenue performance FY 2018-19 to FY 2024/25 .................................................. 42 List of Figures Figure 1: Annual Real GDP Growth Rate, percent ..................................................................................... 22 Figure 2 :Inflation rate, percent ...................................................................................................................... 25 Figure 3: Private Sector Credit ................................................................................................................... 26 Figure 4: Short Term Interest Rates, Percent ............................................................................................ 27 Figure 5: Commercial Bank Rates, Percent ................................................................................................ 27 Figure 6: GCP Trend 2019-2022 ................................................................................................................... 29 Figure 7: Own Source Revenue Trends ...................................................................................................... 42 1. INTRODUCTION Background 1. The Budget Review and Outlook Paper (CBROP) is prepared in accordance with Section 118 of the Public Finance Management (PFM) Act 2012. The law requires that a county Treasury to Prepare a CBROP in respect of the County for each year; and Submit the paper to the County Executive Committee (CEC) by 30th September of that year. In preparing the CBROP, the County Treasury shall specify. • The details of the actual fiscal performance in the previous year compared to the budget appropriation for that year. • The updated economic and financial forecasts with sufficient information to show changes from the forecasts in the most recent County Fiscal Strategy Paper (CFSP) • Information on any changes in the forecasts compared with the CFSP; or • How actual financial performance for the previous financial year may have affected compliance with the fiscal responsibility principles, or financial objectives in the CFSP for that financial year; and • Reasons for any deviation from the financial objectives in the CFSP together with proposals to address the deviation and the time estimated for doing so. Objective of CBROP 2. The objective of County Budget Review and Outlook Paper is to provide a review of the previous year’s fiscal performance and how this impacts the financial objectives and fiscal responsibility principles to be set out in County Fiscal Strategy Paper 2024. It reviews the fiscal and macro-economic projections contained in the CFSP 2024 and set a tentative ceilings for the FY- 2025/26 and the Medium term revenue and expenditure. Why to prepare CBROP 3. The paper is a policy document that links planning and budgeting processes. It is significant in the budget making process within the Medium-Term Expenditure Framework (MTEF) as it reviews previous fiscal performance for the year and identifies any deviations from the budget with the aim of providing realistic forecasts for the coming year. It also assesses how fiscal responsibility principles were adhered to as provided in section 107 of the PFM Act 2012. In addition, the updated macroeconomic and financial outlook provides a basis for any budget revision and sets out broad fiscal parameters for the next budget. The paper is expected to provide indicative sector ceilings for the FY 2025/26 budget and in the medium term to guide Sector Workings groups (SWGs) before being affirmed in the CFSP 2025. II. Review of Fiscal Performance in FY 2023/24 Overview 4 In the FY 2023/2024, The county had a final budget of KES 12.14 billion whereby recurrent budget accounted for KES 8.26 billion and development budget of KES 3.88 billion. The County received a total revenue of KES 11.2 billion compared to KES 11.15 billion in the previous year (2022/23). This represents 92 per cent budget funding compared to 99 per cent in the previous year. The underperformance was mainly attributed to the delayed release of the June equitable disbursement and underperformance in Wajir water and sanitation project. Out of the received revenue the county government spend KES 11.04 in the financial year which was 98.7% absorption level compared to 99% the previous year (2022/2023). The actual Recurrent expenditure amounted to KES 7.79 billion while development expenditure was KES 3.25 billion. The Recurrent expenditure include kshs. 6.79 billion spend by the county executive and kshs. 999.53 Million spend by the county assembly. 5 In allocating the budget for the FY2023/2024, the county complied with the fiscal responsibility principles required by section 107 of the Public Finance Management Act 2012. The total recurrent expenditure was 68 per cent of the total budget in the fiscal year and hence lower than the total revenue received during the year. The development expenditure allocation was 32% which was above the 30% minimum requirement. 6 On the other expenditure front, the recurrent expenditure accounted for 70.6 per cent of the total expenditure while development accounted for 29.4 per cent. This proportion are slightly below the required limits in the fiscal responsibility principles. The non- discretionally nature of the compensation to employees and utilities make the expenditure underperform in terms of the fiscal responsibility principles. the expenditure wages and benefits to public officers was 37.4 per cent of total revenue received, which was 2.4 per cent above the 35 per cent maximum requirements. In order to comply with the requirement, the county government has developed a wage bill reduction strategy and roadmap to reduce wage bill to below 35 per cent with key Strategies that include: Audit of staff academic certificates; onboarding all county payrolls to the HRIS Kenya; elimination of duplications and mitigation of overlap of mandates, roles, functions: and institutionalizing performance management framework. Fiscal Performance FY 2023/24 7 The analysis of FY 2023/2024 fiscal performance is done by comparing the original budget against the final revised estimates for the overall budget by broad economic classification of revenues, recurrent and development. In addition, the analysis compares the fiscal performance of recurrent and development by votes (departments) as well as a highlight on the actual expenditure by vote. 8 The county allocated 68 per cent of its resources to recurrent expenditure while 32 per cent was allocated to development expenditure through the revised budget which was implemented. Table 1: Fiscal Performance by Broad Economic Classification FY 2023/24(KES. Million) 2022/23 2023/24 Deviation (Kshs) % Deviation (Kshs) (Kshs) Actual Actual Target 1. REVENUE & GRANTS a. Exchequer Release Equitable Share 9,474.73 9,065.36 9,853.66 -788.30 -9% Local revenue collection 46.79 147.68 150 -2.32 -2% b. Grants Grants From Partners 772.84 971.26 1,138.20 -166.94 -17% C. Balance B/F 855.38 1,001.16 1,001.16 0.00 0% 2. EXPENDITURE a. Recurrent 7,846 7,789 8,260 472 6% i) Compensation to employees 4,003 4,185.87 4,297.53 111.66 3% ii) Use of goods and services 2,996 2,603.50 2,963.42 359.92 12% iii)Transfer to County assembly 847 999.53 999.53 0.00 0% b. Development 2,378 3,248 3,883 635 16% 9 In the FY 2023/24 the County Government allocated KES 8.26 billion to recurrent expenditure which was 68 per cent of the county total budget. The county revenue performance was Ksh 9.07 billion for equitable share, Kshs 164.95 million from own source revenue, Kshs 971.46 million as grants and Kshs one billion as balance brought forward. This was against a target of Kshs 9.85 billion, Kshs 150 million, Kshs 1.14 billion for Equitable Share, Own Source Revenue and grants respectively. The county executive recurrent expenditure was Kshs 6.79 billion and development expenditure accounted for Kshs 3.25 billion against a target of 7.26 billion and Kshs 3.88 billion for recurrent and development expenditure respectively while the county assembly spend kshs. 999.53 million against a target of the same amount. 10 The highest allocation for recurrent expenditure was the department of health with 34 per cent followed by the County Assembly, department of Public Service, and department of Education, Social Welfare and Family Affairs with 12%, 11% and 10% respectively of the total recurrent allocation. Table 2 highlights recurrent allocation per county departments/ entities. Table 2: Recurrent Estimates by Departments/ Entities FY 2023/24 (KES.) Department Approved Estimates Revised Deviation %Deviati on County Assembly 992,922,326 999,537,966 6,615,640 1% County Executive 577,203,162 597,805,662 20,602,500 4% Finance and Economic Planning 563,047,575 687,054,176 124,006,601 22% Agriculture, Livestock and Veterinary Services 250,166,341 240,342,101 -9,824,240 -4% Health Services 2,652,570,356 2,778,365,152 125,794,796 5% Roads, Transport, Public Works and Housing 247,396,380 257,988,376 10,591,996 4% Water Services 170,588,005 146,747,537 -23,840,468 -14% Energy, Environment and Climate Change 90,321,220 94,273,602 3,952,382 4% Public Service, Special Programs and County Administration 978,861,329 923,879,245 -54,982,084 -6% Education, Social Welfare and Family Affairs 717,641,699 853,008,748 135,367,049 19% ICT, Trade, Investment and Industry 154,467,748 162,487,747 8,019,999 5% Lands, Spatial Planning and Urban Development 65,343,725 64,423,725 -920,000 -1% WAJWASCO 153,913,130 155,579,130 1,666,000 1% CPSB 78,784,872 78,784,872 0 0% Municipality 204,290,329 220,211,079 15,920,750 8% Department Approved Estimates Revised Deviation %Deviati on Total 7,897,518,197 8,260,489,118 362,970,921 5% 11 The County Government total development allocation was 32 per cent of the total budget. The highest development allocation was allocated to Wajir Water and Sewerage Company which was mainly World Bank funded project of Wajir Water and Sanitation project at Ksh 681.2 million, followed by the departments of: Agriculture, Livestock and Veterinary Services; Roads, Transport, Public Works and Housing; Health Services; and Water Services at Kshs 626.74 million, Kshs 609.85million, Kshs 495.38 million and Kshs 424 million respectively. The department of Agriculture, Livestock and Veterinary services allocation mainly comprising of Donor funded projects of Kenya Climate Smart Agriculture, Emergency Locust Response Project, Agricultural Sector Development Support Programme among others as highlighted in table 3 below. Table 3: Development Estimates by Departments FY 2023/24 (KES.) Department Approved Estimates Revised Deviation %Deviat ion County Assembly 0 0 - 0 County Executive 0 0 - 0% Finance and Economic Planning 0 0 - 0% Agriculture, Livestock and Veterinary Services 479,530,537 626,743,537 147,213,000 31% Health Services 438,630,800 495,381,768 56,750,968 13% Roads, Transport, Public Works and Housing 354,650,000 609,859,389 255,209,389 72% Water Services 305,700,000 423,996,000 118,296,000 39% Energy, Environment and Climate Change 355,000,000 228,308,800 - 126,691,200 -36% Public Service, Special Programs and County Administration 18,300,000 4,500,000 - 13,800,000 -75% Education, Social Welfare and Family Affairs 146,850,000 139,484,900 - 7,365,100 -5% ICT, Trade, Investment and Industry 523,000,000 261,000,000 - 262,000,000 -50% Lands, Spatial Planning and Urban Development 255,000,000 244,500,000 -10,500,000 -4% WAJWASCO 666,200,000 681,200,000 15,000,000 2% Department Approved Estimates Revised Deviation %Deviat ion CPSB 0 0 - 0% Municipality 80,500,000 167,554,472 87,054,472 108% Total 3,623,361,337 3,882,528,866 259,167,529 7% Revenue 12 During the FY 2023/2024, the County government received total revenue of KES 11.202 billion which comprised of KES 9.07 billion as equitable Share from the National Treasury, KES 971.46 million as Conditional Grants from development partners, KES 164.95 Million Own Source Revenue and KES one billion from balance previously in the County Revenue Fund Account. This performance was against a target of Kshs 12.14 Billion for the year translating to 92% receipts of the target. Comparatively, this was an underperformance of 6% compared to similar period in the Financial Year 2022-2023. This is mainly due to the fact that the county received 92% of projected equitable share, 100% of the actual balance from the previous year while it received 85 percent of the projected revenues from development partners. The county collected 98% of its Own Source Revenue target during the period under review up from 47 per cent in Financial Year 2022/2023. The improved performance in own source revenue is mainly attributable to improved systems and policy framework to enforce the administration of some key revenue streams for revenue collections as well as expansion of county revenue streams. Expenditure 13 In the financial year under review the County Expenditure amounted to Kshs 11.04 Billion against a total budget of KES 12.14 billion representing 91 percent absorption rate which was the same as the previous year 2022/23. The stagnation in absorption rate is partly attributed to delayed exchequer releases. 14 In the fiscal year under review, the recurrent expenditure amounted to KES 7.79 Billion which was relatively the same as the previous year of 2022/23. The actual expenditure on recurrent translates to 94% of projected recurrent expenditures representing an under- expenditure of KES 471.73 million. This is a significant underperformance from the previous year where the recurrent expenditure recorded 97% absorption rate which is attributable to delayed exchequer releases from the National Treasury. The highest recurrent budget spenders during the financial year were County Assembly and departments of Education, Youth, Gender and Social Services and Public Health, Medical Services and Sanitation with an absorption rate of 100%, 98% and 96% respectively. To improve overall absorption, the County Treasury will continue to put strategies in place to further improve the overall recurrent expenditure absorption going forward while maintaining prudency. 15 In the FY 2023/2024, the development expenditures amounted to KES 3.25 billion compared to budgeted development expenditure of KES 3.88 billion translated to 84% absorption rate for development expenditure up from 76 percent in the previous year 2022/2023. The development expenditure accounted for 29.4 per cent of total actual expenditure up from 23 percent during the financial year 2022/2023. The departments of Public Health, Medical Services and Sanitation, Municipality, Agriculture and Livestock Development where the biggest development spenders with a development absorption rate of 100%, 99% and 98% respectively.The relative low absorption rate in development expenditure was attributable to delayed releases of funds by the National Treasury especially the last quarter of the financial year. Table 4 below highlights the final revised budget and actual expenditure by vote. Table 4: Expenditure by departments 2023/2024 (KES. Million) Department Recurrent Development Revised Estimates (A) Actual Expendit ure (B) absorpti on rate Revised Estimates (C ) Actual Expenditur e (D) absorpti on rate County Assembly 999.54 999.54 100% 0 0 - County Executive 597.81 550.60 92% 0 0 - Finance and Economic Planning 687 656.60 96% 0 0 - Agriculture and Livestock Development 240 227.50 95% 626.74 613.8 98% Public Health, Medical Services and Sanitation 2,778.37 2,680.50 96% 495.38 495.5 100% Roads & Transport Department 257.99 223.30 87% 609.86 579.2 95% Water Department 146.75 140.20 96% 423.99 342.5 81% Energy, Environment and Natural Resources 94.27 79.60 84% 228.31 75 33% Department Recurrent Development Revised Estimates (A) Actual Expendit ure (B) absorpti on rate Revised Estimates (C ) Actual Expenditur e (D) absorpti on rate Public Service, Special Programs and Decentralized Unit & Town Administration 923.88 807.60 87% 4.50 4.4 98% Education, Youth, Gender and Social Services 853.01 836.50 98% 139.48 112.7 81% ICT, Trade, Industrialization, Co- operative Development 162.49 148.80 92% 261.00 160.2 61% Public works, Lands, Housing and Physical Planning 64.42 58.00 90% 244.50 211.7 87% WAJWASCO 155.58 96.10 62% 681.20 486.4 71% CPSB 78.78 73.10 93% 0.00 0 0% Municipality 220.21 211.10 96% 167.55 166.6 99% Total 8,260.49 7,788.76 94% 3,882.53 3,248.00 84% Adherence to the Fiscal Responsibility principles 16 The FY 2023/2024 Budget execution complied with section 107 of the Public Finance Management Act 2012 as follows; 1) The County Government’s recurrent expenditure shall not exceed the County’s total revenue. The County total allocation towards recurrent vote for the fiscal year amounted to KES 8.26 Billion against total revenue of KES 12.14 Billion representing 68% of total revenue and therefore within the required legal limits. The County total recurrent expenditure represented 70.6% of actual expenditures during the year. To ensure that the recurrent expenditure does not balloon, the County Treasury will continue to explore strategies that are aimed at minimizing expenditures on non-core expenditures to create more fiscal space for development. 2) Over the medium term, a minimum of 30% of the County budget shall be allocated to development expenditure. The allocation for development budget amounted to KES 3.88 Billion against a total budget of KES 12.14 Billion and hence translating to 32% of the total budget which was two percentage points above the 30% minimum requirement and therefore county complied with the statutory requirement. 3) The County Government’s expenditure on wages and benefits for public officers shall not exceed a percentage of the County government revenue as prescribed by the regulations. The County’s total expenditure on wages and benefits for public officers during the fiscal year amounted to KES 4.19 Billion for the County Executive against a total budget of KES 12.14 Billion and KES 11.2 Billion actual receipts. Therefore, expenditure on wages accounted for 38.6 per cent of total budget and 41 per cent of actual receipt during the year which was 6 percent above the required threshold. The county government is implementing strategies and an action plan towards maintaining the wage bill at below 35 per cent by Financial year 2026/2027 through staff audit, performance management and eliminating duplication of mandates and roles while growing the Own Source Revenue 4) Over the medium term, the County government’s borrowings shall be used only for the purpose of financing development expenditure and not for recurrent expenditure. During the financial year, there was no legal framework for county borrowing hence the county government did not pursue any borrowing neither is it projecting to borrow in the medium term as well. 5) Public debt and obligations shall be maintained at a sustainable level as approved by County Government (CG). The County Public Debt is limited to the pending bills. The county government has taken broad step in verifying these liabilities together with the oversight bodies. Based on the outcome of the audit, the county government is committed to clear the verified liabilities within the next five years through a payment plan that will entrench equity throughout the process. 6) Fiscal risks shall be managed prudently The risks identified in this C-BROP will be mitigated through the strategies identified in the document and hence all projected risks will be addressed appropriately where and when they arise. 7)A reasonable degree of predictability with respect to the level of tax rates and tax bases shall be maintained, taking into account any tax reforms that may be made in the future During the year under review there were no changes on taxes and rates and in the medium term, the government will: develop a clear strategy to raise the revenue streams from the current 18 streams to 25; Increase tax, rates and rents compliance to 98 per cent in the medium term; Enhance the collaboration of the county government with key stakeholders in order to enhance own source revenue; and strengthen county revenue administration. Overall Balance and financing 17 In the FY 2023/2024, the County government received total revenue of KES 11.19 billion translating to 92% of all projected revenues during the fiscal year. This translates to a deficit financing of Kshs 957.35 million up from 84.9 million shillings in the Financial Year 2022/2023 which was a significant drop. The major deficit was as a result of failure by the National Treasury to release June exchequer release. The County Government will continue to collaborate and partner with the National Government in establishing smooth transfer of funds going forward. The revenue performance per source is indicated in the table 5 below. Table 5: Actual Receipts FY 2023-2024 Revenue Sources Approved Estimates Actual Receipt Deficit/ Surplus Proportion achieved Equitable Share 9,853,656,422 9,065,363,910 -788,292,512 92% Local Revenue 150,000,000 164,953,671 14,953,671 110% DANIDA 26,952,863 15,912,988 -11,039,875 59% Emergency Locust Response Project (ELRP) 178,454,153 177,269,419 -1,184,734 99% Agricultural Sector Development Support Programme 11 3,901,152 500,000 -3,401,152 13% Fertilizer Subsidy 2,235,432 -2,235,432 0% Revenue Sources Approved Estimates Actual Receipt Deficit/ Surplus Proportion achieved Water and Sanitation Development Project- World Bank 600,000,000 408,223,728 -191,776,272 68% Kenya Informal Settlement Improvement Project (KISIP II) 180,000,000 180,000,000 0 100% Financing Locally-Led Climate Action Program (FLLoCA) 12,235,782 1,235,782 -11,000,000 10% Financing Locally-Led Climate Action Program (FLLoCA) 125,000,000 184,416,290 59,416,290 148% Conditional Grant for Transfer of Library Function 9,421,475 0 -9,421,475 0% Cash Balance from the Previous Year 1,001,160,705 1,001,160,705 0 100% Conditional Grant for Community Health Promoters 0 3,901,152 3,901,152 100% TOTAL 12,143,017,984 11,202,937,645 -940,080,339 92% Implication of FY 2021/2022- 2023/2024 fiscal performance 18 During the FY 2023/24 The fiscal performance in is largely in line with the financial objectives outlined in the PFM Act, 2012 and the 2023 CFSP despite some few deviations. Revenue projections and expenditure were adjusted downward in the 2023/24 budget estimates to reflect realistic revenue targets and avoid pending bills at the end of the financial year. 19 The overall performance of revenue for the FY 2023/24 was slightly above the projected in the CFSP 2023 by 780 Million at KES 12.14 billion shillings as a result of the balances brought forward for the FY 2022/2023 though despite the slight adjustment in revenues, the overall resource envelope remains largely in conformity with the CFSP 2023 projection. The slight deviations between the Budget estimates and the projections in the CFSP 2023 amounted to Ksh 222 million as a result of over projection of Own source revenue by Kshs 50 Million, total grants revenue by Kshs 162 and equitable share by Kshs 10 million. 20 The revenue base did not change significantly enough to warrant an adjustment to projected revenues for the current budget. In the current financial year however, the weather projections indicate suppressed rainfall which might require the county to adjust the budget to respond to drought related hazards. 21 The low absorption capacities of some county departments may require that the current expenditure ceilings are adjusted in the next County Fiscal Strategy Paper to allocate resources to high priority areas. However, the overall baseline expenditure ceilings for spending departments will largely be retained at the same levels as per the 2024 CFSP and hence any major adjustments would be necessitated by change in priority across sectors or some identified one-off expenditures. III. Recent Economic Development and Outlook This section is divided into three subsections, namely Recent Economic Developments; Medium Term Fiscal Framework and Risks to the Outlook. Recent Economic Developments 22 This sub-section looks to analyze the impact of national macroeconomic variables such as inflation and GDP growth and relies heavily on national level data from the National Treasury, the National Bureau of Statistics and other such sources. It is divided into two parts, an overview of recent developments and their impact and, a progress report on budget implementation. National Economic Performance GDP Growth 23 The Kenyan economy is currently unwinding from the effects of negative and persistent global and domestic shocks that had pushed the economy to its lowest activity level. These shocks included COVID-19 pandemic and its ensuing effects, conflict in Eastern Europe and Middle East that led to global supply chain disruptions and the adverse effects of climate change from the prolonged drought in 2021 to the floods in the first half of 2024. These shocks escalated the cost of essential household commodities including fuel prices, and led to a rapid depreciation of the Kenya Shilling exchange rate, pilling pressure on public debt. 24 Various government interventions, structural reforms and policies have supported economic recovery. The economy grew by 5.6 percent in 2023 from 4.9 percent in 2022, a demonstration of resilience and the beginning of economic recovery. The growth was largely driven by a strong rebound in the agricultural subsector, which benefited from favorable weather conditions after two years of severe droughts and the robust performance of the services sector. The performance of the industrial sector, particularly manufacturing which has remained subdued. This growth momentum has continued in 2024 with the economy expanding by 5.0 percent in the first quarter compared to a growth of 5.5 percent in the corresponding quarter in 2023(Figure 8: Annual Real GDP Growth Rates, percent) 25 The primary sector grew by 5.0 percent in the first quarter of 2024 compared to a growth of 5.3 percent in the first quarter of 2023. This was as a result of the robust growth in the agriculture, forestry and fishing sub-sector despite a contraction in the mining and quarrying sub sector. Activities in the agriculture, forestry and fishing sub-sector expanded by 6.1 percent in the first quarter of 2024 compared to a growth of 6.4 percent in a similar quarter in 2023. The performance was evident in the significant increase in production of tea, milk and sugarcane during the quarter under review. Mining and Quarrying sub-sector contracted by 14.8 percent in the first quarter of 2024 compared to a contraction of 11.0 percent over the same period in 2023. This was due to a decline in production of most minerals such as titanium, soda ash and gemstone. Figure 1: Annual Real GDP Growth Rate, percent Source: BROP 2024, Figure 8 26 On the onset of the long rains to June 2024, the economy received adequate rainfall that resulted in increased production in the agriculture sector growing by 2.3 percent. However, according to Kenya Meteorological department’s OND forecast, 2024, Wajir county is one of the areas that are expected to experience occasional rainfall throughout the season. However, the total rainfall amounts are likely to be below the long-term average for the season. Prolonged dry spells are also likely, and the rainfall is expected to be poorly distributed in both space and time. The county will prioritize fodder and water distribution during the dry spell and adequately prepare the farmers so as to take advantage of the OND rains. 27 Available economic indicators for the first half of 2024 point to mixed performance in the economy reflecting sustained performance in agriculture, improved exports and services sector and subdued industrial sector.. In view of this and other consideration including domestic and external factors, economic growth is projected at 5.2 per cent in 2024 and 5.4 per cent from earlier projections of 5.5 per cent, respectively. This projections are underpinned by broad- based private sector growth and ongoing Government interventions and strategies under the Bottom Up Economic Transformation Agenda (BETA). Additionally, implementation of prudent fiscal and monetary policies will continue to support economic activity Table 6: Sectoral GDP Performance Source: 2024 BROP , Table 15 Employment 28 Relaxation of various containment measures, such as the night curfew, lockdowns and travel restrictions coupled with the rollout of COVID-19 vaccination had a positive impact on economic activities. This provided an environment that spurred economic recovery and growth in 2023. There was a general decline in unemployment and inactivity levels, with total employment surpassing the pre-pandemic level. Total new jobs created in the economy in 2023 were 3,138.3 thousand up from 3015.4 thousand in 2022 of which 992.8 thousand were in the public sector, while 2,145.5 thousand were in the private sector as per Kenya Economic Survey 2024. Jobs created in the informal sector grew by 4.5% as compared to 4.1% growth in the formal sector. Inflation Developments 29 Food inflation remained the dominant driver of overall inflation in August 2023. However, it declined to 7.5 percent in August 2023 from a peak of 15.0 percent in August 2022 reflecting easing of food prices arising from increased supply due to ongoing harvests, seasonally factors, international developments and Government measures on zero rated imports. Nonetheless, sugar prices remained elevated driven by domestic and global factor The overall year-on year inflation is within the Government target range of 5±2.5 percent largely driven by easing food and fuel prices. Overall inflation remained stable at 4.4 percent and 4.3 percent in August and July 2024, respectively , thereby remaining below the mid- point of the target for three consecutive months.. This is a drop from 6.7 percent in August 2023, and a peak of 9.6 percent in October 2022 (Figure 9). Favourable weather conditions coupled with targeted government interventions have partly led to the reduction in the cost of food production thereby lowering food inflation. Other factors expected to support low inflation include the pass-through effects of the strengthening exchange rate, decreases in electricity and pump prices and the CBK monetary policy stance. 30 To anchor inflation expectations and address exchange rate pressures, the Central Bank of Kenya through the Monetary Policy Committee (MPC) tightened the monetary policy by raising the Central Bank Rate (CBR) from 10.5 percent in July 2023 to 13.0 percent in February 2024. However, in the MPC meeting held on August 6, 2024, the Committee decided to lower the CBR to 12.75 per cent as the previous measures had contributed to lowering overall inflation to below the mid-point of the target range, stabilized the exchange rate, and anchored inflationary expectations. 31 Food inflation remained a key driver of overall year-on-year inflation though it declined to 5.3 percent in August 2024 from 7.5 percent in August 2023. The easing of food prices was supported by increased food supply arising from favorable weather conditions, continued Government interventions particularly through subsidized fertilizer, and the general easing of international food prices. Prices of most vegetable food items increased in the month of August 2024 compared to the same period in 2023 while those of non- vegetable food items declined during the same period. 32 Fuel inflation declined to 4.7 percent in August 2024 from 14.2 percent in August 2023. The decline largely reflecting the easing global oil prices and appreciation of the Kenya Shilling’s which resulted in a downward adjustment of pump prices; and lower electricity prices. Core (non-food non-fuel) inflation has remained low and stable reflecting the impact of tight monetary policy and muted demand pressures Figure 2 :Inflation rate, percent Source of Data, BROP 2024, Figure 9 Monetary and Credit Developments 33 Growth in private sector credit from the banking system slowed to 4.0 percent in the year to June 2024 compared to a growth of 12.2 percent in the year to June 2023, reflecting the impact of exchange rate appreciation on foreign currency denominated loans and monetary policy tightening. Reduced credit growth was observed in manufacturing, trade (exports) and building and construction. These are some of the sectors with significant foreign currency denominated loans 34 The Monthly (month on month) credit flows to the private sector have slowed down since December 2023 following the monetary policy action of increasing the central bank rate to manage inflation expectation which resulted in the increased cost of credit (Figure 10). Sustained demand particularly for working capital due to resilient economic activity, the implementation of the Credit Guarantee Scheme for the vulnerable MSMEs and the projected economic growth for 2024 will continue to support private sector credit uptake. Figure 3: Private Sector Credit Source: BROP 2024, Figure 10 Interest Rates Developments 35 Interest rates in the year to August 2024 increased reflecting the tight monetary policy stance. The interbank rate increased to 12.97 percent in August 2024 compared to 10.48 percent in August 2023 and has remained within the prescribed corridor around the CBR (set at CBR± 150 basis points) (Figure 11). The 91-day Treasury Bills rate increased to 15.8 percent in August 2024 compared to 13.3 percent in August 2023 while the 182-day Treasury Bills rate also increased to 16.7 percent from 13.2 percent over the same period. The 364-day Treasury Bills rate increased to 16.9 percent in August 2024 from 13.6 percent in August 2023. This has increased the cost of borrowing by Government from the domestic market. Figure 4: Short Term Interest Rates, Percent Source of Data: Central Bank of Kenya 36 Commercial banks average lending and deposit rates increased in the year to July 2024 in tandem with the tightening of the monetary policy stance thereby reflecting high cost of investable funds. The average lending rate increased to 16.8 percent in July 2024 from 13.8 percent in July 2023 while the average deposit rate increased to 11.3 percent from 8.4 percent over the same period. Consequently, the average interest rate spread decreased to 5.6 percent in July 2024 from 5.4 percent in July 2023 (Figure 12). Figure 5: Commercial Bank Rates, Percent Source of Data: Central Bank of Kenya Overview of recent developments 37 The Gross County Product (GCP) expanded on average of 5.28 percent between 2013 and 2022 which was higher than the national average growth of 4.37 percent. Durimg this period Wajir county was one of the five fastest growing counties in Kenya as per the GCP REPORT 2023 by KNBS. During this period, the highest growth rate was experienced in 2015 while the lowest growth rate was experienced in 2014. In 2022, the county economy grew by 5.135 percent mainly propelled by the service sector at 48.05 percent, Agriculture and Livestock sector at 37.60 percent and the Industry sector at 14.35 percent as shown by Figure 7. The lowest growth of 5 percent could be as a result of slowdown of economic activities caused by the 2022 electioneering period as a result of investment uncertainties that usually characterize elections in Kenya. However, the slowdown in GCP expansion is expected to subside in 2023 and 2024 due to the favorable weather conditions and significant county investments that were realised in the county in that period. Figure 6: GCP Trend 2019-2022 Source of Data: Analysis from GCP 2023 report 38 The highest contributor to Wajir Gross County Product, GCP, which is the Agriculture, Forestry and Fishing sector has grown from 35 percent in 2018 to 37 percent in 2022 due to slight improvement in the climatic conditions that led to marginal increase in agricultural and livestock production. However, this is down from around 40 percent recorded in the period between 2013 and 2017. The lower contribution from the sector could be attributed to the climate change factors that are making livestock production in the County less predictable as a result of frequent droughts; livestock production is the main source of livelihood and economic mainstay for the county. The public administration and defense sectors grew significantly to contribute 22 percent in 2022 compared to 14 percent in 2017, this could be as a result of the increased activities in the county administration and security sectors to contain and adequately combat insecurity in the county (Table 11) 0 5 10 15 20 25 2019 2020 2021 2022 G ro w th r at e YEAR WAJIR GCP GROWTH TREND GROWTH RATE Linear (GROWTH RATE) Table 7: GCP by economic activity at current prices 2022 ECONOMIC ACTIVITIES TOTAL VALUE(Million Sh) %contribution to GCP 1 Agriculture, Forestry and Fishing 23,296 37.6 2 Mining and Quarrying 809 1.3 3 Manufacturing 1,285 2.1 4 Electricity Supply 55 0.1 5 Water supply; waste collection 309 0.5 6 Construction 6,429 10.4 7 Wholesale and retail trade; repair of motor vehicles 1,197 1.9 8 Transport and storage 4,732 7.7 9 Accommodation and food service activities 56 0.1 10 Information and communication 428 0.7 11 Financial and Insurance activities 500 0.8 12 Real estate activities 1,900 3.1 13 Professional and technical services 246 0.4 14 Administrative support services 294 0.5 15 Public administration and defence 13,628 22.0 16 Education 2,926 4.7 17 Human health and social work activities 3,130 5.1 18 Other service activities 942 1.5 19 Financial Services indirectly measured -214 TOTAL 61,948 100 Growth Prospects 39 In the short to medium term, the GCP growth will largely be determined by the climate outlook, especially the performance of October-November-December (OND) rain season that is forecasted to be above average and expected to give momentum to the Agriculture and Livestock production. The agriculture sector remains the largest employer with about 70 percent of the population driving their livelihoods from the sector. More than 83 percent of women had not been employed for 12 months prior to Kenya Demographic Health Survey of 2022 while over 40 percent of men were unemployed for the same period prior to the survey. The youth unemployment rate in the county is lower (5.6%) than the national average (8.5%) 40 The county has experienced increased business activities in the FY 2023-2024 due to creation of enabling business environment and enhanced government expenditure in the sectors of health, roads and agriculture. In FY 2023/24, the County generated a record total of Kshs.164.95 million from its revenue sources, inclusive of FIF. This amount represented an increase of 252.9 per cent compared to Kshs.46.75 million realized in a similar period in FY 2022/23 and was 110 per cent of the annual target and 1.8 per cent of the equitable revenue share disbursed during the period. Employment 41 The main source of employment in the county is the agricultural sector that employs more than 60 percent of those in employment. The county has 83 percent of women in labour force and 43 percent of men out of employment for 12 months prior to the KDHS 2022. Slowdown in the Economic activities is projected to persist in the short term; however, enhanced OND rains could result in upturn in the livestock production sub-sector and ultimately increase employment for both men and women. Progress report on budget implementation: 42 The County Government of Wajir has an approved budget of KES 13.76 Billion for the financial year 2024/25. It projects to receive KES 3.45 Billion in the first quarter ending September 2024. The county has so far received KES 936.62 Million of balance brought forward from the previous year. The total expenditure for the first quarter of the Financial year amounted to kshs. 518 million comprising of kshs. 309 Million for recurrent expenditure and kshs. 209 Million for development expenditure. County economic outlook and policies 43 The County is anchoring the economic transformation agenda on three key pillars of Agriculture and Livestock production; Micro Small and Medium Enterprises; Human Health; and Education and Social Welfare. In the year 2024/2025, the sectors have been allocated a combined 45 percent of the available resources. Agricultral and MSMEs sectors will each consume 5 percent while education and social welfare will spend 8 percent and Health Services 27 percent. Key policy decisions in these sectors include: Construction and equipping of industrial and aggregation park: This is a joint venture between the national and county government that is aimed to provide a platform for value addition for livestock and crop products with a focus on leather value chain in Wajir county. This will create employment for the youth and increase income for farmers. To this end, the county and national governments have each committed Kshs 250 million for construction and completion of the industrial park in the FY 2024/2025. Strengthening legal and institutional framework for county revolving fund: The county government is committed to enact relevant polices and legislation to revive the revolving fund to ensure access to reliable and affordable credit for MSMEs across all important value chains in the county. County Enterprise Development Fund Bill is currently under development so as to formalize the priority county revolving fund Investment in Model Farms: The county government has allocated Kshs over 200 million in the FY 2024/2025 for the establishment of three model farms in three sub-counties with highest potential for integrated agricultural production as well enhance access to credit by farmer producer organizations through the World Bank funded Food Systems and Resilience Project . These farms are expected to boost both crop and livestock production to feed the industrial and aggregation centre. Relevant policies will be enacted to facilitate establishment and operationalization of the model farms. Construction of additional ECD classrooms: The county government will use the appropriate building technology to construct 30 classrooms annually. The education department will also explore collaboration with national agencies such as NG-CDF to fund construction of classrooms at all levels of basic education. For a start, the department of education is working with the department of public works to use locally available materials and ABT centres across the county to actualize the 30 classrooms annually for ECD starting in FY 2024/2025. Policies to enable labor-based construction will be put in place to further cut the costs of construction. This is aimed to provide learning space for the 63 percent children that are out of school at ECD level. The Government will also support the vulnerable members of the society by up scaling cash transfers for the severely disabled, empowerment of youth through talent development and other programmes that will fight radicalization, drug abuse as well as FGM and Gender Based Violence. Increased Access to Affordable and Quality Healthcare: Accessible and quality healthcare is vital for healthy population. The government will prioritize steady procurement of pharmaceutical and non- pharmaceutical items to improve their supply and distribution for the health facilities. Emergency referral service remains an important programme for the sector to ensure the public access services not offered in the county. Currently, the County Government spends at least Kshs. 48,000 per referral to Nairobi. To reduce referrals out of the county, the Government will continue upgrading the Wajir county referral hospital to level 5 and the sub- county hospitals to standard level 4. This will involve effectuating theatres, intensive Care Unit (ICU), High Dependency Care Unit (HDU), Casualty and Emergency Unit. Four maternities in high volume facilities will be constructed and equipped. Additionally, health centres (3A) will be upgraded to level 3B. Medium Term Fiscal Framework 44 The county’s fiscal policy objective will be to focus government spending in the coming year and the medium term on efforts to expand the county’s two key productive sectors of Livestock & Agriculture and Micro, Small and Medium Enterprises that can support value chains. The county will take advantage of the National Government’s Bottom up Economic Transformation Agenda (BETA) focus on the five priority areas that include Agriculture and MSMEs. Already, in the FY 2024/2025, the national and county governments have each allocated Kshs 250 million towards construction and equipping of industrial/aggregation park to favorable international and national economic environment. The establishment of model farms will boost production to feed the industrial park while at the same time providing learning platforms for famers to benefit from climate smart solutions and technologies in agriculture. The government projects a balanced budget in the medium term. In order to sustain the balanced budget while expanding the priority expenditure, the government is automating the OSR management. The necessary legal and policy framework to expand the tax base will be put in place immediately starting in the FY 2024/2025. 45 In order to achieve fiscal consolidation and reduce wasteful expenditure, the government will direct resources towards priority programmes and projects and cut back expenditures on non-essentials. The government will also implement the recommendations of the Human Resources Audit that was conducted in 2022/2023. The implementation of the recommendations is expected to attain sustainable levels of wage bill while at the same time optimizing county human capital to deliver services to the county residents. Additionally, the county government is conducting audit on staff academic certificates and consequently those found to be in possession of fictitious certificates will be expunged from the payroll. 46 The government will continue to improve on OSR collection from the current collection of 164 million shillings by activating the high potential streams that have remained dormant due to legal and policy weaknesses. In the FY 2024/2025 the automation of OSR is expected to be completed while enactment of laws to unlock parking fees, Land rates, single business licensing will be pursued. The government projects to collect 39 percent of the revenue potential in 2024/2025 rising to 63 percent by 2026/2027 and 78 percent by 2027/2028. The county OSR potential is estimated at Kshs 640 million by the CRA analysis of 2022. 47 In the FY 2024/2025 and the medium term, the Government will ensure strict adherence to fiscal responsibility principles. The County Treasury will rationalize to ensure resources allocated to non-core recurrent expenditure are shifted to capital and development programs to ensure sustainable and inclusive growth across the county. While the county government has maintained a balanced budget and forecasts to remain so in the medium term, it is still faced by the daunting challenge of pending bills that stand at over Kshs 2.33 billion as at 30 June 2024. This implies that the county debts are estimated at 16 percent of the total revenues expected annually in the medium term. In order to bring down the debt to 15 percent of the revenues that is considered sustainable, the government will ensure that there are no additional pending bills that are accumulated over the medium-term. The government will also set aside funds to offset pending bills in each department. An allocation of Kshs 500 million annually towards settling of verified bills will be pursued in the medium term. Risks to the outlook 48 This section addresses the key risks the County Government envisages with regard to the coming budget year and the medium-term. External risks: Kenya’s growth outlook portrays a stable macroeconomic environment in the medium term. However, in the medium term there are downside risks to the inflation rate largely driven by projected increase in fuel prices as a result of geopolitical tensions in the Middle East and between Ukraine and Russia. This presents a serious threat to achievements envisioned in this policy document. Projected increased food prices may erode purchasing power in the county which could as well potentially culminate a significant drop in OSR collection. Insecurity that is largely fueled by activities across the border is also a threat to livestock production and commercial activities at the border towns that consequently lead to job losses and revenue. Fiscal Risks: The main fiscal risk is in respect of equitable share as the national government revises the county government allocation downwards against the backdrop of the withdrawal of the Finance Act, 2024. If the mediation efforts between the Council of Governors and the national government do not bear fruit with regard to the Division of Revenue Bill, 2024, this will have substantial negative effect on the county government revenue. Consequently, this could mean some priority projects would not be financed since equitable share normally represents 97 percent of the county government’s total revenue. The county will continue to monitor this development and will take appropriate policy measures to counteract any adverse effect should this risk materialize. Huge Wage Bill and unverified Pending Bills pose a fiscal risk as well. The county will institute stringent measures to cap wage bill ballooning through human resource rationalization and freezing of employment. The County policy of prioritizing the payment of verified pending bills will continue to be in force and any pending bill carryover will form the first charge against the current budget allocation before entering into new commitment. IV. Resource Allocation Framework Implementation of 2024/25 Budget 49 The County Government experienced delay in the approval of the county budget for the FY 2024/25 and was approved in August 2024. The delay was occasioned by the delay in the approval of the County Allocation of Revenue Act 2024 and the difference in the division of revenue bill approved by the senate and the national assembly. as a result of the delayed approval of the county budget, the rejection of the finance bill 2024 and delayed approval of the County allocation of revenue act 2024, the county anticipates delayed disbursement of funds and slow project implementation for the Financial year 2024/25. 50 In the Financial year 2024/25, the county intends to complete the upgrading of four level 4 hospitals and the completion of emergency and accident unit at the Wajir referral hospital. Further kshs 100 milion is set aside for the equipping of the constructed facilities as well as existing facilities. The department of agriculture and livestock intends to support farmers with irrigation infrastructure as well as construction of 45,000 M3 Capacity water pan. The county further plans to operationalize the model farms being established through FLOCCA support to ensure they act as education centre and encourage attitude change. The Department of education, sports and social services intend to construct 36 classrooms in the six sub-counties as well as upgrading of the Wajir football stadium. 51 The county currently projects to receive Kshs. 13.79 billion in the financial year 2024/25 comprising of kshs.10.2 billion equitable share, Kshs. 0.564 billion as conditional grant from GOK, Kshs. 1.8 billion as proceeds from loans and grants, Kshs. 936 million as balance from the previous year as well Kshs. 200 million as own source revenue. This is projected to reduce onces the final division of revenue bill and county allocation of revenue bill 2024 are approved. The county will the necessary changes through a supplementary budget to ensure no deficit in financing of the county budget. Medium Term Fiscal Projections 52 The County Budget for the FY 2025/26 and Medium-Term Expenditure Framework will build up on the government’s efforts to contain expenditures within sustainable levels and ensure compliance with the fiscal responsibility principles. The county is striving hard to contain the growing wage bill and rationalize office operations and maintenance to ensure the fiscal responsibility principles are attained in the next financial year and the medium term. The county intends to invest more resource in the agriculture, rural and urban development and the water department to improve food security level in the county. Significant investment will be channeled to the health sector to improve the critical health indicators including but not limited to maternal mortality, immunization coverage, doctor patient ratio as well as provision of specialized services. 53 The county treasury projects a stable macro-fiscal performance of both at the national and the county level. The bottom-up economic transformation agenda of the national government and the restoring hope strategies of the county government.In the FY 2025/26 Total revenue is projected at Ksh 11.6 billion out of this total Equitable share is projected at Ksh 10.2 billion, own source revenue at Ksh 225 million while development partners’ grants are projected at Ksh 950 billion. Own source revenue performance will be enhanced through legislation of critical revenue bills including land rating bill and revenue administration bill and will be boosted by implementation of key priority projects in the Third Generation CIDP and Governor’s Manifesto. On the other hand, the overall county expenditure is projected at Ksh 11.8 billion out of this, recurrent expenditure will amount to Kshs. 8.26 billion while development expenditure will amount to Kshs. 3.54 billion. 54 The Medium-term County revenue projections are revised from the County Fiscal Strategy paper 2024. The Government revenue is projected to grow to Kshs. 11.9 billion in the FY 2026/27 and Kshs. 12.03 billion in FY 2027/28. Medium-Term Expenditure Framework 55 In the medium term, The Government will focus on a strict policy of expenditure prioritization to ensure county economic recovery as well as full implementation of the CIDP. In allocating resources by the county departments, the following criteria will be followed: i.Linkage of Programmes that support Economic Recovery; ii.Linkage of the programme with the priorities of third generation CIDP; iii.Degree to which a programme addresses job creation and poverty reduction; iv.Cost effectiveness and sustainability of the programme; v.Extent to which the Programme seeks to address viable stalled projects and verified pending bills. 56 In addition, the county government will prioritize the provision of core services, ensuring equity and minimizing costs through the elimination of duplication and inefficiencies in its planning and Programme implementation. In this respect, the total expenditure without pending bills is projected to reduce by 9% from 2024/25 and thereafter increase by 2% in FY 2026/27 and 1% in FY 2027/28. The Departmental tentative ceiling is contained in annex 3. V. Medium Term Revenue Strategy 57 The county revenue over time has been increasing at a decreasing rate. The equitable share rose from Kshs 9.4 billion in FY2022/23 to Kshs 9.853 billion in FY 2023/24 which further grew to Kshs 10.24 billion in FY 2024/25. this is projected to reduce to Kshs. 10.21 billion in 2025/26. Conditional grants rose from Kshs 1.23 billion in FY2022/23 to Kshs 1.467 billion in FY 2023/24 and further grow to 1.84 billion in FY 2024/25. This is projected to reduce to kshs. 952 million in the FY 2025/26. The County will strive to negotiate with the national government on the enhancement of the equitable share and comply with the all the conditionalities of the conditional grants to improve the absorption of donor funded project. The county with vigorously mobilize resources from all potential donors and development partners to improve infrastructure development in the county. County Own Source Revenue 58 The County own source revenue has been performing below the optimal level since the inception of devolution. The county recorded a substantial growth in own source revenue from 2022/23 to 2023/24. This attributable to streamlining health cost sharing revenue as well increasing service charges for some revenue base. The county had an actual of own source revenue performance in the past seven years as shown in the table below; Table 8: Own Source Revenue performance FY 2018-19 to FY 2024/25 Finanncial Year Revenue Actual Performance 2018/19 60,123,112 2019/20 60,417,086 2020/21 66,264,717 2021/22 52,425,625 2022/23 46,746,101 2023/24 164,953,671 2024/25* 200,000,000* *estimate Figure 7: Own Source Revenue Trends Note: FY 2024/25 is a projection 59 In order to boost county revenue, there is need to improve the own source revenue collection strategies and mechanisms. This will include instituting key policies to ensure expansion of revenue streams. The county will fast- track legislation of the following bills and policy in order to increase own - 50,000,000 100,000,000 150,000,000 200,000,000 250,000,000 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25* ac tu al r ev en u e p er fo rm ac n e financial year Revenue Actual Performance source revenue: Land Rating Bill, Revenue Administration Bill, Transport Bill and Land Valuation Roll. In addition to this and in order to address the declining own source revenue trends, the county treasury will develop a revenue strategy that would help in: • Facilitating the implementation of priority programmes in the CIDP and Governor’s manifesto; • Identifying tax reforms to be undertaken such as expanding the own source revenue streams and automation of most of the streams as well as tax administration reforms; and • Tax education to the residents as well as encouraging tax and rates voluntary compliance. 60 The strategy’s main objective will be to provide the county with a framework for guiding own source revenue reforms in order to boost county revenues and improve revenue streams overtime. Specifically, the strategy will endeavour to: • Raise the revenue streams from the current 17 streams to 25; • Increase tax, rates and rents compliance to 95 per cent in the medium term; • Enhance the collaboration of the county government with key stakeholders in order to enhance own source revenue; • Strengthen county revenue administration. 61 In order to develop competent county revenue strategy, the process will be consultative and the objectives and interventions in the strategy will be aligned with The Third Generation CIDP as well as Governor’s Manifesto. Annex 1: Wajir county Government Operations 2019/2020-2027/2028 (Kshs. Millions) Budget Item Approved Printed Estimates Projection FY 2019/20 FY 2020/21 FY 2021/22 FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 1. Total Revenue 11,483 10,944 11,585 11,235 12,143 13,759 11,673 11,895 12,028 Equitable share & BBF 10,186 8,991 9,974 10,174 10,855 11,151 10,211 10,580 10,776 Conditional Grants 401 711 127 0 0 564 287 287 287 Local Revenue Collection 150 150 100 100 150 200 225 250 275 Donor funds 746 1092 1,384 961 1,138 1,844 950 778 690 2. Total Expenditure 11,483 10,945 11,586 11,234 12,142 13,759 11,673 11,895 12,028 Recurrent 6,268 6,781 7,342 8,125 8,260 8,473 8,159 8,261 8,271 Development 5,215 4,164 4,244 3,109 3,882 5,286 3,514 3,634 3,757 Annex 2: Own Revenue performance for Year 2023-2024 Year 2023 2024 REVENUE STREAM JULY AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN TOTALS Stock Auction fees 535,500 608,550 630,700 351,000 87,500 480,200 622,200 777,400 802,050 552,900 577,900 730,700 6,756,600 Stock Export fees 144,500 175,300 248,500 143,900 12,000 194,700 181,800 28,250 - 6,000 124,000 86,000 1,344,950 Slaughter fees 53,400 112,000 175,200 115,580 23,400 205,200 248,050 219,800 226,050 147,000 242,400 215,350 1,983,430 Hides &Skin - - - 5,000 - - - 21,000 - - - - 26,000 Arabic Gum - 9,240 - - - - 480 2,400 900 14,800 1,910,000 - 1,937,820 Miraa Cess 3,116,000 3,266,300 2,605,000 1,805,000 413,800 2,591,600 3,512,000 1,565,700 1,024,500 2,167,200 2,047,000 3,293,200 27,407,300 Single Business Permit(SBP) 241,180 261,700 512,000 109,100 67,600 645,100 1,153,200 3,010,900 2,807,270 785,200 760,590 876,100 11,229,940 Septic Tank 35,000 41,000 - - - 128,600 - - - - - - 204,600 Conservancy 36,900 11,900 - 54,300 33,300 15,450 - - - - 15,600 - 167,450 Land Rent 57,550 2,200 40,500 154,750 155,708 679,266 46,120 807,232 1,113,350 209,046 571,313 420,359 4,257,394 House Rent 123,100 123,100 226,000 226,000 321,692 - 364,080 340,588 1,188,096 512,157 3,424,813 Survey fees 90,288 318,459 124,380 - - 151,100 427,697 - - - - - 1,111,924 peging fees/site visit - - - - 15,500 - 27,000 1,000 9,500 - - - 53,000 Water - - - - - - - - - 91,000 - 95,000 186,000 Building Materials 116,000 212,400 269,000 188,800 107,000 480,000 636,880 379,000 350,000 494,000 461,000 477,900 4,171,980 Market gate fees(fresh produce) 34,100 42,000 - 27,000 17,500 33,500 5,500 - 27,500 36,500 - - 223,600 Year 2023 2024 REVENUE STREAM JULY AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN TOTALS Scrap metal - - 6,000 4,000 - 57,800 9,000 63,750 - - 20,000 - 160,550 Cereals 100,500 174,100 47,800 145,400 127,900 194,700 105,700 58,300 145,800 229,120 1,329,320 Charcoal - - - - - - 84,000 - - - - - 84,000 Hire of County Assets - - 518,000 94,050 87,000 64,000 499,492 187,600 - 220,400 34,800 166,900 1,872,242 Cost sharing 2,367,904 2,109,110 1,421,780 1,140,787 1,334,855 1,385,985 1,736,770 1,943,950 2,150,945 1,634,020 1,857,335 2,233,700 21,317,141 Medical Certificate 50,800 - - 25,400 34,200 33,000 8,000 188,500 173,300 28,500 43,100 37,300 622,100 Wayleave 88,900 - Advertisemen t - - - - - - - - - - 145,000 - 145,000 Sale of tender documents - - - - - - 47,050 5,000 - - 14,400 45,200 111,650 Veterinary department - 18,175 27,200 22,925 - 5,000 14,100 9,500 - - - 14,000 110,900 Transport/par king fee - - - - - - - - - 10,000 - 10,000 FIF 10,110,000 3,060,000 28,494,132 10,873,687 1,800,000 17,960,000 2,200,000 74,497,819 MONTHLY TOTALS 7,102,722 7,485,534 6,626,060 4,612,992 12,725,363 10,660,093 9,630,287 38,069,194 20,183,140 8,275,566 28,118,334 11,704,186 164,953,671 Annex 3: Tentative Projected Baseline Ceilings FY2025/26 – 2027/28 MTEF period by Sector and expenditure type (Millions). Department/Sector Expenditure Type Budget Estimates 2024/25 C-FSP 2024 Ceiling 2025/26 C-BROP 2024 Ceiling 2025/26 Projections 2026/27 Projections 2027/28 Agriculture, Livestock and Veterinary Services Recurrent 250 235 230 233 234 Development 465 549 460 473 488 Sector Total 715 784 690 707 721 Roads and Transport Recurrent 226 233 220 223 223 Development 547 441 483 508 526 Sector Total 772 674 703 731 750 ICT, Trade,Investment and Industry Recurrent 188 162 180 183 183 Development 474 434 200 206 212 Sector Total 662 596 380 388 395 Health Services Recurrent 2,983 2,980.00 2,900 2,941 2,945 Development 799 524 530 545 563 Sector Total 3,782 3504 3,430 3,486 3,507 Education, Social Welfare and Family Affairs Recurrent 793 789 780 791 792 Development 254 237 240 247 254 Sector Total 1,047 1026 1,020 1,038 1,046 Water Services Recurrent 279 291 275 279 279 Department/Sector Expenditure Type Budget Estimates 2024/25 C-FSP 2024 Ceiling 2025/26 C-BROP 2024 Ceiling 2025/26 Projections 2026/27 Projections 2027/28 Development 1,273 496 771 802 836 Sector Total 1,552 787 1,046 1,081 1,116 Energy, Environment and Climate Change Recurrent 97 92 98 99 100 Development 507 288 310 319 329 Sector Total 604 380 408 418 428 Lands, Urban Development and Public Works Recurrent 108 67 101 102 103 Development 702 658 290 298 307 Sector Total 810 725 391 401 410 Finance and Economic Planning Recurrent 677 665 645 654 655 Development 0 - Sector Total 677 665 645 654 655 County Executive Recurrent 575 583 545 553 553 Development 0 - Sector Total 575 583 545 553 553 County Assembly Recurrent 993 900 992 992 993 Development 0 - Sector Total 993 900 992 992 993 Public Service, Special Programs and County Administration Recurrent 1,009 932 900 913 914 Development 48 15.15 30 30 30 Department/Sector Expenditure Type Budget Estimates 2024/25 C-FSP 2024 Ceiling 2025/26 C-BROP 2024 Ceiling 2025/26 Projections 2026/27 Projections 2027/28 Sector Total 1,057 947.15 930 943 944 County Public Service Board Recurrent 72 76.4 73 74 74 Development 0 - Sector Total 72 76.4 73 74 74 Wajir Municipality Recurrent 222 247 220 223 223 Development 218 66 200 206 212 Sector Total 440 313 420 429 435 Total Total 13,759 11,961 11,673 11,895 12,028 Recurrent total 8,473 8,252 8,159 8,261 8,271 Development Total 5,286 3,708 3,514 3,634 3,757 Proportion of recurrent to total budget 62% 69% 70% 69% 69% Proportion of development to total budget 38% 31% 30% 31% 31% Annex 4: Budget Calendar NO ACTIVITY RESPONSIBILITY TIMEFRAME/ DEADLINE 1. Develop and issue circular on Budget preparation and MTEF guidelines. C.E.C Finance & Planning 27th August, 2024 2. Submission of the County Annual Development Plan to the County Assembly C.E.C Finance & Planning 1st September, 2024 3. Launch of Sector Working Groups All departments coordinated by County Treasury 13th September, 2024 4. Submission of Departmental Public Expenditure Reviews to County treasury All Accounting Officers 20th September, 2024 5. Preparation of Draft County Budget Review and Outlook Paper (CBROP) Macro Working Group 25th September, 2024 6. Presentation of County Budget Review and outlook Paper (CBROP) to County Executive Committee for approval Macro Working Group 30th September, 2024 7. Capacity building for Budget Execution and Programme Based Budget (PBB) County Treasury in collaboration with National treasury September – December, 2024 8. Submission of County Budget Review and Outlook Paper (CBROP) to the County Assembly Macro Working Group 14th October, 2024 NO ACTIVITY RESPONSIBILITY TIMEFRAME/ DEADLINE 9. Circulation of approved CBROP to County Executive and Accounting Officers County Treasury. 15th October, 2024 10. Draft Sector reports by SWG’s All departments – County Treasury to co- ordinate 10th January, 2025 11. Submission of final Sector Working Groups reports Sector Working Groups/ County Treasury 24th January, 2025 12. Development of County Fiscal Strategy Paper (CFSP) County Treasury. 10th February, 2025 13. Submission of County Fiscal Strategy Paper (CFSP) to C.E.C for approval. County Treasury. 17th February, 2025 14. Submission of County Fiscal Strategy Paper (CFSP) to County Assembly County Treasury. 27th February, 2025 15. Develop and issue final guidelines on preparation of 2022/23 Medium Term Budget County Treasury. 29th February, 2025 16. Submission of departmental budget proposals to county treasury All Departments 5th March,2025 17. Consolidation of final draft budgets County Treasury. 18th March, 2025 18. Submission of Draft Budget Estimates to County Executive Committee for approval County Treasury. 24th March,2025 19. Submission of Draft Budget Estimates to County Assembly County Treasury. 18th April, 2025 NO ACTIVITY RESPONSIBILITY TIMEFRAME/ DEADLINE 20. Report on Draft Budget Estimates from County Assembly County Assembly 8th May, 2025 21. Consolidation of final budget estimates County Treasury 15th May,2025 22. Preparation and submission of budget statement to the County Assembly County Treasury 2nd June, 2025 23. Approval of the Budget & Appropriation Bill by the County Assembly County Assembly 25th June,2025 24. Appropriation Bill Passed County Assembly 27th June,2025 25. Finance Bill Passed County Assembly 29th August, 2025 26. Submission of Vote on Account to County Assembly (if applicable) County Assembly 30th June, 2025