COUNTY GOVERNMENT OF ELGEYO MARAKWET THE COUNTY TREASURY COUNTY FISCAL STRATEGY PAPER (CFSP) 2015 FEBRUARY 2015 i © County Fiscal Strategy Paper (CFSP) 2015 To obtain copies of the document, please contact: The County Treasury P. O. Box 220-30700 ITEN, KENYA Email: emcounty2013@gmail.com, governor@elgeyomarakwet.go.ke Website: www.elgeyomarakwet.go.ke ii FOREWORD This 2015 County Fiscal Strategy Paper (CFSP), the second to be prepared since the inception of County Government of Elgeyo Marakwet, sets out the county's priority programs to be implemented under the Medium Term Expenditure Framework (MTEF). In the 2014 CFSP, the county set its strategic priorities which were aligned to the national transformative five-pillar strategy aimed at transforming the Kenyan economy as follows: Investing in quality and accessible healthcare services, agricultural transformation and food security, scaling investments in other key infrastructure, including roads, tourism and water to reduce cost of doing business and improve county competitiveness, ECDE enhancement and social protection for improved livelihoods amongst other priorities. These strategic priorities are capital intensive and taking into account the limitation in our resource envelope; implementation of these priorities were phased and will therefore remain as the 2015 CFSP priorities. Implementation of programs expounded in this CFSP is expected to raise county economic efficiency and productivity and in turn, make our county competitive, thus creating vast opportunities for productive jobs and securing livelihoods. Implementation of 2014/2015 budget started slowly due to delayed disbursements from the national treasury coupled with challenges in movement to IFMIS platform at the start of the fiscal year. This has now been addressed and County Government operations are progressing well. We will build on the achievements made so far in most sectors and through the policies set out in this CFSP; we will scale up our efforts in order to address the existing as well as emerging challenges. To improve the effectiveness of the public service, our government launched institutional performance assessment to assess the quality of management practices and service delivery standards in county government departments. The Medium-Term Expenditure Framework (MTEF) balances continued growth in spending with fiscal consolidation. Spending on social and economic programmes will continue to grow in real terms. Going forward, many of the county’s large infrastructure projects will start to operate; upgraded roads will get more goods to markets and ensure efficient transport system, water schemes improvements will ensure that communities have access to safe water and urban planning initiatives will help our towns become integrated places of work and social life. These are just a few of the major outputs expected from full implementation of this CFSP. The 2015 CFSP emphasizes containing costs and improving efficiency across government departments and entities. To this end, we will moderate the pace of public expenditure growth while accelerating the delivery of quality services. Spending baselines which are basis for ceilings allocations have undergone rigorous review taking into account factors which include: the capacity of departments and public entities to manage resources, the link between outcomes, expenditure and departmental mandates, proposals from the public and programme performance so far iii Development expenditures will be shared out equitably across wards on the basis of CIDP priorities as well as other equity allocation parameters to ensure social equity and environmental sustainability. Emphasis will be given to completion of on-going projects and in particular infrastructure projects and other projects with high impact on poverty reduction and equity, employment and wealth creation. The document covers five chapters. Chapter one highlights the justification for the preparation of the document while at the same time detailing the legal framework for the CFSP. In Chapter two, recent economic developments on the global and national level and the impact that they have had on the recent county economic development have been highlighted. Chapter three explores the fiscal and budget framework that will inform the budgetary process. Chapter four details the sector and departmental ceilings for the Medium Term Expenditure Framework (MTEF) Period. Chapter five highlights the conclusions and finally, the Annexes section contains documentations that have informed the preparation of this County Fiscal Strategy Paper (CFSP) SHADRACK CHELIMO CEC, FINANCE AND ECONOMIC PLANNING iv ACKNOWLEDGEMENTS A debt of gratitude to individuals and entities for their zeal and zest in the work that culminated in the realization of this document. The county would like to thank these individuals for the various roles they played during the preparation of this County Fiscal Strategy Paper, CFSP. As usual, the preparation of CFSP continues to be a collaborative effort. Most of the information in this Paper was obtained in collaboration Departments and other county entities. We are grateful for their inputs. We especially acknowledge the dedication of the technical team from the Department of Finance and Economic Planning comprising mainly of the staff at the Economic Planning and Budget Units. These officers, led by Mr. John Maritim the Head of Economic Planning Unit and Mr. Johnkeen Jairo the Head of Budget, are Accountant Samwel Kibirong and Economists; Mr. Titus Kosgey, Felix Kipngetich and Elisha Tanui. Other officers who participated in the exercise include Jemimah Toroitich, Sheila Masitsa, Ernest Kiptoo and Duncan Kiplagat. The significant time and effort they spent collecting, collating, designing and compiling this document is appreciated. This core team undertook the preparation task with the support and guidance of Finance and Economic Planning Department’s County Executive Committee (CEC) Member Mr. Shadrack Chelimo and Chief Officer Mr. Jeremiah Changwony. This, hereby, is to further extend the county’s gratitude to them and all others who participated in the CFSP preparation process too. JEREMIAH CHANGWONY CHIEF OFFICER, FINANCE AND ECONOMIC PLANNING v ABBREVIATIONS ADP Annual Development Plan BPS Budget Policy Statement CEC County executive committee CFSP County Fiscal Strategy Paper CIDP County Integrated Development Plan CLMB County Lands Management Board CRA Commission of Revenue Allocation ECDE Early Childhood Development Education ECE Early Childhood Education GDP Gross Domestic Product ICT Information Communication Development IDA International Development Association IFMIS Integrated Financial Management Information System KNBS Kenya National Bureau of Statistics MTEF Medium Term Expenditure Framework NAS National Accounts Statistics PBB Programme Based Budgeting PFM Public Finance Management PPP Public Private Partnerships SACCOs Savings and Credit Cooperatives Organizations’ SMEs Small and Medium Enterprises SRC Salaries and Remuneration Commission UNCTAD United Nations Conference on Trade and Development WFP World Food Programme vi CONTENTS FOREWORD....................................................................................................................................................................................................... iii ACKNOWLEDGEMENTS ................................................................................................................................................................................v ABBREVIATIONS ............................................................................................................................................................................................ vi CONTENTS........................................................................................................................................................................................................ vii LIST OF TABLES .............................................................................................................................................................................................. ix LIST OF ANNEXES ............................................................................................................................................................................................ x 1 INTRODUCTION AND BACKGROUND ......................................................................................................................................... 1 1.1 Rationale for County Fiscal Strategy Paper (CFSP) .................................................................................................... 1 1.2 Roles in CFSP Preparation ..................................................................................................................................................... 1 1.2.1 County Treasury .............................................................................................................................................................. 1 1.2.2 Departments/ Sectors ................................................................................................................................................... 2 1.2.3 Commission of Revenue Allocation (CRA) ........................................................................................................... 2 1.2.4 Members of the public and Interest Groups ....................................................................................................... 2 1.2.5 Other Development Actors ......................................................................................................................................... 2 1.2.6 County Assembly ............................................................................................................................................................. 3 1.3 Legal Framework for County Fiscal Strategy Paper (CFSP) ................................................................................... 3 1.4 Fiscal Responsibility Management (Section 107) ....................................................................................................... 4 1.5 2015 CFSP Strategic Priorities and Policy Goals.......................................................................................................... 4 2 RECENT ECONOMIC DEVELOPMENTS AND POLICY OUTLOOK ..................................................................................... 8 2.1 Background .................................................................................................................................................................................. 8 2.2 Global Economic Environment Impacts .......................................................................................................................... 8 2.3 National Economic Situation ................................................................................................................................................ 9 2.4 County Economic Performance and Prospects .......................................................................................................... 10 2.4.1 Overview of county economy .................................................................................................................................. 10 2.4.2 Growth Prospects and Challenges ......................................................................................................................... 10 2.5 Risks to the Outlook................................................................................................................................................................ 10 3 FISCAL POLICY AND BUDGET FRAMEWORK ........................................................................................................................ 11 3.1 Background ................................................................................................................................................................................ 11 3.2 CFSP Alignment to Budget Policy Statement ............................................................................................................... 11 3.3 Risk to implementation of County Strategic priorities aligned to BPS ............................................................ 12 3.4 Overview of 2015 Medium-Term Fiscal Policy .......................................................................................................... 12 3.5 Fiscal Performance.................................................................................................................................................................. 13 3.5.1 Fiscal policy ..................................................................................................................................................................... 13 3.5.2 Fiscal Reforms and Policy ......................................................................................................................................... 13 3.6 2015/16 Budget Framework ............................................................................................................................................. 14 vii 3.6.1 Revenue Projections .................................................................................................................................................... 14 3.6.2 Expenditure Forecasts ................................................................................................................................................ 15 3.6.3 Deficit, Debt policy and Debt Sustainability ...................................................................................................... 16 3.6.4 Compliance with Fiscal Responsibility Principles .......................................................................................... 16 3.7 Challenges in County Public Finance Management .................................................................................................. 16 4 MEDIUM TERM EXPENDITURE FRAMEWORK ..................................................................................................................... 17 4.1 Background ................................................................................................................................................................................ 17 4.2 Resource envelop .................................................................................................................................................................... 17 4.3 Collaboration with National Government..................................................................................................................... 18 4.3.1 Conditional Allocations from Development Partners ................................................................................... 18 4.3.2 County Lands Management Board: ....................................................................................................................... 18 4.3.3 County Policing Authority: ....................................................................................................................................... 18 4.3.4 County Education Board: ........................................................................................................................................... 19 4.3.5 Disaster Management and Reduction: ................................................................................................................. 19 4.4 Key Priorities for the 2015/16 Medium Term Budget ........................................................................................... 19 4.4.1 Sector Priorities (Programmes and Sub-Programmes) ............................................................................... 19 4.5 Medium-Term Expenditure Estimates ........................................................................................................................... 20 4.6 Baseline Ceilings ...................................................................................................................................................................... 21 4.6.1 2015/2016 CFSP Allocation Analysis .................................................................................................................. 22 5 CHAPTER FIVE: CONCLUSION ...................................................................................................................................................... 23 6 ANNEXES ................................................................................................................................................................................................ 24 viii LIST OF TABLES Table 1: Revenue Projections ........................................................................................................................................... 14 Table 2: Revenue for 1st Half of 2014/15 ................................................................................................................... 15 Table 3: Expenditure Analysis for 1st Half of 2014/2015 .................................................................................... 15 Table 4: Resource Envelop ................................................................................................................................................ 17 Table 5: Conditional Allocations ..................................................................................................................................... 18 Table 6: Medium-Term Expenditure Estimates ........................................................................................................ 20 Table 7: Baseline Ceilings ................................................................................................................................................... 21 ix LIST OF ANNEXES Annex 1: Departmental/Sector Ceilings 2014/15 – 2017/18 ............................................................................ 24 Annex 2: Recurrent Departmental/Sector Ceilings 2014/15 – 2017/18 ...................................................... 26 Annex 3: Development Departmental/Sector Ceilings 2014/15 – 2017/18................................................ 27 Annex 4: Departmental/Sector Ceilings 2015/16 ................................................................................................... 28 Annex 5: Summary Departmental/Sector Ceilings 2015/16 .............................................................................. 29 Annex 6: Summary Recurrent Departmental/Sector Ceilings 2015/16 ........................................................ 30 Annex 7: Summary of Recurrent 2015/16 Programmes& Sub-Programmes .............................................. 31 Annex 8: Summary of Development 2015/16 Programmes& Sub-Programmes ....................................... 35 x 1 INTRODUCTION AND BACKGROUND 1.1 Rationale for County Fiscal Strategy Paper (CFSP) The main objectives for preparing the CFSP are to specify; • Mechanism for aligning it with the national objectives contained in the Budget Policy Statement before the national budget is finalized • Broad strategic priorities and policy goals that will guide the county government in preparing its budget for the coming financial year • Financial outlook with respect to county government revenues, expenditures and borrowing for the coming financial year and over the medium term • Details of the sector and departmental ceilings for the Medium Term Expenditure Framework (MTEF) Period to ensure continuity in resource allocation from the last financial year consistent with the MTEF budgeting approach. • Create a mechanism for public participation in the budgeting process thus informing priority choices for development. • The overall deficit and financing, the underlying risks, structural measures and strategic interventions for development initiatives to be undertaken in the coming Financial Year and in the medium term 1.2 Roles in CFSP Preparation 1.2.1 County Treasury The PFM Act 2012 Section 103 states that “There is established for each county government, an entity to be known as County Treasury” in each county. The PFM Act 2012 legal framework is firmly anchored in Article 201 of the Constitution of Kenya and gives effect to ‘the Principles of public finance’ The PFM Act states that the County Treasury to be headed by the County Executive Member in charge of Finance and Planning shall comprise the Chief Officer and the departments of the County Treasury responsible for financial and fiscal matters with the following responsibilities of 1 monitoring, evaluating and overseeing the management of public finances and economic affairs of the county government as per the financial responsibilities provided for in the Constitution. The County Treasury has been structured into six units comprising of Finance, Budget, Audit, Procurement, Revenue and Economic Planning and each with its mandates and responsibilities structured to achieve the roles of the County Treasury. The Treasury is thus, tasked with the responsibility of preparing the County Fiscal Strategy Paper (CFSP) in collaboration with the other departments in the county to ensure strategic priorities and policy goals informs the preparation of the budgets 1.2.2 Departments/ Sectors In the preparation of the CFSP and consequently the county budget, all sectors and departments in the county submits their respective strategic priorities and policy goals which would have been agreed upon by the various development actors within their sectors 1.2.3 Commission of Revenue Allocation (CRA) The role of CRA in the CFSP involves calculating the amounts to be allocated to each county from the 15% of the national revenue and communicating the same to the counties to be used in the budgeting process in arriving at the resource envelop for the county. CRA also gives advisories on budget ceilings for the county executive and county assembly 1.2.4 Members of the public and Interest Groups Apart from the requirements of openness, accountability and public participation in decision- making matters, the Constitution introduced fundamental changes to Public financial management and specifically to the budget process. Stakeholders’ participation is thus useful in the identification of stakeholders’ social and developmental challenges and homegrown interventions to address the challenges and the enhancement of greater ownership, and participation of citizens in budget implementation, monitoring and evaluation via inclusivity in the planning and budget making process. Therefore in complying with these provisions, the CFSP preparation considers public participation as vital. The CFSP will be tabled at the County Economic and Budget Forum whose membership includes community representatives for approval before submission to the County Assembly. 1.2.5 Other Development Actors The County will continue to seek and sustain support from donors and other development partners to fill the resources gap in the CIDP projected budget. Therefore for accountability, openness and 2 shared objectives, the CFSP preparation involved all developments partners in its preparation and the budget process as a whole. 1.2.6 County Assembly The County Assembly plays a very important role in the budget process including the preparation of the CFSP. These roles include; • Receiving and approving among other documents the County Fiscal Strategy Paper (CFSP) • Approve financial borrowing to finance deficit in the budget by the county government in accordance with Article 212 of the Constitution • While respecting the principle of separation of powers, the county assembly may exercise oversight over the county executive committee and any other county executive organ on the implementation of the budgeted priorities • County Assembly Speaker organizes and determines business to be conducted in the house including those regarding CIDP approval and implementation. • County Assembly Speaker Receives bills, motions and questions and prepares an order paper for house business including those relating to CIDP. 1.3 Legal Framework for County Fiscal Strategy Paper (CFSP) The preparation of the County Fiscal Strategy Paper (CFSP) is provided for in the Public Finance Management (PFM) Act section 117. Some of the provisions in this section state that; (1) The County Treasury shall prepare and submit to the County Executive Committee the County Fiscal Strategy Paper for approval and the County Treasury shall submit the approved Fiscal Strategy Paper to the county assembly, by the 28th February of each year. (2) The County Treasury shall align its County Fiscal Strategy Paper with the national objectives in the Budget Policy Statement. (3) In preparing the County Fiscal Strategy Paper, the County Treasury shall specify the broad strategic priorities and policy goals that will guide the county government in preparing its budget for the coming financial year and over the medium term. (4) The County Treasury shall include in its County Fiscal Strategy Paper the financial outlook with respect to county government revenues, expenditures and borrowing for the coming financial year and over the medium term. 3 PFM Act 2012 section 117 also states that in preparing the County Fiscal Strategy Paper (CFSP), the County Treasury shall seek and take into account the views of the Commission on Revenue Allocation, the public, any interested persons or groups and any other forum that is established by legislation. It further states that The County Treasury shall consider any recommendations made by the county assembly when finalizing the budget proposal for the financial year concerned. 1.4 Fiscal Responsibility Management (Section 107) In line with the Constitution, the Public Financial Management (PFM) Act, 2012, sets out fiscal responsibility principles to ensure prudency and transparency in the management of public resources. The PFM law (Section 15) states that: (1) Over the medium term, a minimum of 30% of the county budget shall be allocated to development expenditure (2) The county government’s expenditure on wages and benefits for public officers shall not exceed a percentage of the county government’s revenue as prescribed by the regulations (3) 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 (4) Public debt and obligations shall be maintained at a sustainable level as approved by county assembly (5) Fiscal risks shall be managed prudently (6) 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 1.5 2015 CFSP Strategic Priorities and Policy Goals The 2015 County Fiscal Strategy Paper the second to be prepared under the devolved system of governance , reaffirms the broad policies and strategies outlined in the national 2015 Budget Policy Statement (BPS), under a five pillar transformation program covering: (i) creating a conducive business environment; (ii) investing in agricultural transformation and food security; (iii) investing in first-class transport and logistics; (iv) investing in quality and accessible healthcare services and quality education as well as strengthening the social safety net to reduce the burden on the households; and (v) supporting devolution for better service delivery and enhanced economic development. 4 In aligning the county’s strategic objectives and policy goals, and in line with the five pillars contained in the BPS, five county strategies and policy goals to be implemented in the Medium Term Expenditure Framework (2015/16 – 2017/18)have been identified. These main strategic priorities and policy goals are; Strategic Priority 1: Enhancing Public Private Partnerships and partner collaborations Strategic Priority 2: Agricultural Transformation and Food Security Strategic Priority 3: Infrastructural Developments Strategic Priority 4: Access to quality Social Services Strategic Priority 5: Enhancing service delivery through devolution The CFSP’s strategic priorities and policy goals have therefore been aligned as follows; 1. Strategic Priority 1: Enhancing Public Private Partnerships and collaborations - Enhanced development cooperation, networking and collaborations through Public Private Partnerships (PPP) approach which will ensure faster development, replication of best development practices and increasing the network base that will spur development even further 2. Strategic Priority 2: Investing in agricultural transformation and food security – The county’s economy and livelihood is driven by agriculture which is depended upon by over 76 percent of county’s rural population. Crop farming, livestock production and fisheries whose optimum harnessing could lead to enhanced food security, employment creation, related sectors’ development and natural resource conservation, are the sub-sectors under agriculture. The sector is also the main driver of the non-agricultural economy with a multiplier effect in manufacturing, non-agricultural operations such as transportation, education, and other social services. When the sector performs well, the entire economy performs well. To build on the momentum already set in the sector in 2014/15 fiscal year though with meager resource allocation, the county undertakes to: i. Develop a comprehensive transformation strategy and a time-bound measurable action plan focusing on unlocking agricultural productivity among smallholder and livestock production enhancement initiatives as well as commercial farmers ii. Prioritize investments in research and extension services, soil management, making available high yielding seeds, zoning and earmarking specific crops for highest yields through cash crops development, productivity and technology adoption, Kerio Valley irrigation strategy, horticultural development, fish farming promotion and support, value addition and marketing, value chain linkages, wide application of appropriate technology and mechanization to achieve the highest level of production as well as re- 5 organization of farmers into viable cluster groups to reach economies of scale. Infrastructural development and elevation of Chebara ATC will also unlock the potential in the sector iii. Need to exploit the provision of Vision 2030 flagship project of creating disease free zone along the Kerio Valley enhance targeting export market for livestock and livestock products by enhancing disease control and surveillance. Major challenges facing the sector include high cost of inputs, poor livestock husbandry, unpredictable rainfall, overdependence on rain-fed agriculture, lack of markets, crop and livestock disease outbreaks and limited application of agricultural technology and innovation The above strategies are capital intensive and could not be fully realized in the current fiscal year with budget allocation of ksh.96, 233,388 giving justifiable grounds as to why the sector is strategic priority for the county in the 2015/16 fiscal year with a proposed sector allocation of ksh. 148,887,736. 3. Strategic Priority 3: Infrastructural Development Infrastructural developments are geared towards market accessibilities, opening up of rural areas, tourism enhancement and attracting investors to the county. In current financial year, the county allocated ksh. 262,062,031 and has taken substantial strides in ensuring improved infrastructural development. A total of 12 roads were graded, covering a total of 164 kilometres. Widening of roads was done on 5 roads totalling 53 kilometres. Bush clearing was done totalling 135 kilometres of roads. Culvert installation was done totalling 307 metres. Some roads such as Emsea-Kimwarer and Chebulbai- Kondabilet had gabion boxes installed, totalling 163metres. Gravelling was done also, the volume totalling 36,934.5 cubic metres. Construction of a road bridge on Chemuiywa on the Emsea-Kimwarer road was also done. To reduce costs on the above works, the county procured 2 Bomag Rollers and 5 Ashok Leyland Lorries. Machine based works achieved through engagement of the county graders cumulatively was grading of 344.3 km roads within the county. A major challenge to the sector has been inadequate resource allocation and technical staff to oversee implementation of programmes and projects. 4. Strategic Priority 4: Access to quality Social Services In striving to bring quality healthcare closer to the people, aggressive programmes to increase access to quality healthcare through health infrastructure improvement, recruitment and deployment of health personnel to facilities and efficient distribution of adequate medical supplies has been undertaken. So far upgrading and expansion of Iten 6 County Referral Hospital is steadily progressing and this will make the hospital a critical provider of quality healthcare and thus ease the costly burden of referral of patients to hospitals outside the County. Further, the department of Health has acquired 5 ambulances which have been distributed across the County for effective medical emergency response. In order to best serve patients in this age of modern medicine, our healthcare facilities must maintain good working scondition state of the art equipment. To this end, the county has equipped Iten County referral hospital with modern equipment and plans are underway to equip health facilities across the county with equipment including delivery sets, fridges and other critical laboratory equipment. This calls for substantial investment in the sector through sizeable budget allocation. In education, the county has been working to improve the quality of education, especially at the basic level. This has been done through building and equipping of modern ECD classrooms in all the wards and recruitment of ECDE teachers. The main challenges affecting the education sector are inadequate teaching staff, teaching & learning materials, school infrastructure and funds to meet the high demand for bursary allocation to bright and needy students. Rebranding of technical and vocational education and giving it the important attention and support it deserves in the development of our county and nation at large calls for attention and consideration to enable youths acquire technical skills for their socio-economic wellbeing 5. Strategic Priority 5: Enhancing service delivery through devolution The spirit of the Constitution and other Acts on devolution was envisaged a service delivery mechanism upto the lowest level of the county’s administrative structure. However, several impediments within the 2013/14 and 14/15 fiscal years have hampered the establishment of adequate administrative and technical units at the Sub-county and Ward levels. In striving to ensure accessible service delivery at all units, the 2015 CFSP therefore has identified enhancement of service delivery through devolution as one of the county’s strategic objective and policy goal. This will be achieved through operationalization of all intended offices, equitable distribution of resources and enhancement of community participation in development. 7 2 RECENT ECONOMIC DEVELOPMENTS AND POLICY OUTLOOK 2.1 Background The county’s performance is largely dependent on the formulation and implementation of prudent policies to guide service delivery. The county’s performance will also depend highly on the country’s economic performance. Generally, the county operates under a stable macroeconomic environment. The largest expenditure driver in the first half of the Financial Year 2013/14 was infrastructural development and the promotion of access to markets especially given that the county economy is heavily dependent on agriculture and livestock. Therefore, market access is vital for employment and equitable income distribution. It is important however to note that to ensure equitable development, resource distribution is sensitive to regional, as well as demographic considerations both regarding equity and efficiency to be realized. 2.2 Global Economic Environment Impacts The development of the global economy can be traced back to many hundreds of years when traders from the East and West came together to exchange goods. However, the growth of the modern global economy is marked by a number of features including but not limited to; world trade, comparative costs, comparative advantage, balance of payments, government policy, world institutions e.g. UNCTAD, regionalism etc. This CFSP is framed against a backdrop of uneven and sluggish global recovery. World economic output is expected to strengthen gradually from 3.3 percent growth in 2014 to 3.8 percent in 2015, driven mainly by growth in advanced economies. Although the euro area has exited recession, growth remains anemic, hampered by high unemployment, large debt stocks, and tight private sector borrowing conditions. Despite deceleration in 2014, growth in emerging markets and developing economies is projected to increase modestly in 2015, supported by stronger domestic demand and some recovery in global demand. Many African countries are undergoing structural adjustment and trade liberalization programmes. In some cases, these have met with limited success. They can create market opportunities, but they also can cause internal economic upheavals for long periods of time, detracting from investment by outsiders and limiting the export opportunities, especially if interest rates rise, as is often the case. In Sub-Saharan Africa, growth is expected to remain strong, at about 5 percent in 2014 and 5¾ percent in 2015, driven by sustained infrastructure investment, buoyant services sectors, and strong agricultural production, even as oil-related activities provide less support for the oil producers. In a few countries, economic activities are facing headwinds from the recent ebola outbreak (Guinea, Liberia and Sierra Leon), inappropriate domestic policies (South Africa), and more recently, macroeconomic imbalances (Ghana and Zambia). 8 The economic environment is one of the major determinants of market potential and opportunity. Careful analysis of this, particularly income and the stage of economic development is essential. Failure to do so will lead, at best, to sub optimal opportunity and, at worst, to disaster. Less developed countries like Africa, are at a disadvantage, due to their primary material export dependence. It behooves these nations in the continent to derive policies and strategies for rapid industrialization, or forever be at the mercy of world demand and prices 2.3 National Economic Situation The county’s performance is largely dependent on the formulation and implementation of prudent policies to guide service delivery and the country’s economic performance. The Kenya National Bureau of Statistics (KNBS) completed the process of rebasing and revising of the National Accounts Statistics (NAS) in September 2014. The rebased GDP estimates in nominal terms for 2013 is Ksh 4,757.5 billion which represents 25.3 percent increase from the previous estimates. This translates to US$ 1,269 in GDP per capita in 2013 up from US$ 994, placing Kenya at lower middle income economy. Recent developments in the key macroeconomic variables are encouraging. Growth in real GDP remains resilient but downside risks remain. Real GDP is projected to expand by 5.3 percent in 2014 from an earlier forecast of 5.8 percent in 2014, 6.9 percent in 2015 and 7.0 percent in 2018. In terms of fiscal years, the projections translate to 5.5 percent in 2013/14, 6.1 percent in 2014/15, 7.0 percent in 2015/16 and 7.3 percent in 2018/19. The economic growth outlook is underpinned by continued good performance across all sectors of the economy. The projected growth assumes normal weather pattern in 2015 and the medium term. Inflation is expected to be maintained at a single digit level and near the 5 percent target reflecting implementation of a prudent monetary policy and easing of both food and oil prices, and stability of the shilling exchange rate to the major international currencies following increased short term capital inflows and remittances. The above mentioned level of growth will be supported by increased production in agriculture following the interventions being put to revamp the sector together with other measures, continued investment in infrastructure projects, expansion of activities in other sectors of the economy such as building and construction, manufacturing, retail and wholesale and financial intermediation, among others. The growth will also benefit from increased investments and domestic demand, following investor confidence and the on- going initiatives to deepen regional integration. The growth will accelerate in the outer years as issues suppressing growth are addressed which include: infrastructure development, removal of obstacles that includes cost of energy by increased geothermal generation, successful integration, financing access, opportunities for the SMEs, and the development of the oil and gas sector. 9 2.4 County Economic Performance and Prospects 2.4.1 Overview of county economy Human development indicators show that the county has 52.7 percent of residents living below the poverty line compared to the national poverty level of 45.2 percent. The levels of poverty in the county are geographically distributed. At the Escarpment and The Kerio Valley, poverty levels are relatively higher while in the Highlands poverty level is relatively low. The county’s economy and livelihood is driven by agriculture which is depended upon by over 76 percent of county’s rural population. Crop farming, livestock production and fisheries whose optimum harnessing could lead to enhanced food security, employment creation, related sectors’ development and natural resource conservation, are the sub-sectors under agriculture. More than 80 percent of the county’s income is from agro-based economic activities. This income status effectively requires a well-managed and reliable physical infrastructure that supports and sustains progressive and efficient output optimization. 2.4.2 Growth Prospects and Challenges The three ecological zones in the county have varied levels of socio-economic developments and resource endowments. A review of these zones show that for the overall socio-economic development to be realized, there is need to invest in improvement of quality education at all levels, improving road network and power supply, eradicating alcoholism and drunkenness, improving value and quality of agricultural products through value addition and intensifying irrigation in the Kerio Valley. Nevertheless, in the face of these challenges lies growth potential that can propel the county to higher economic possibilities. These growth prospects include; enhanced tourism, value addition ventures, improved agricultural productivity, revamp irrigation investments and economic gains from sports related activities amongst others. 2.5 Risks to the Outlook The risks to the outlook for 2015/16 and the medium-term include continued weak growth in advanced economies that will impact negatively on our exports and tourism activities. Further, geopolitical uncertainty on the international oil market will slow down the manufacturing sector. Public expenditure pressures, especially recurrent expenditures, pose a fiscal risk. Wage pressures due to increased recruitments, upward review of some allowances by SRC and inefficiencies may limit continued funding for development expenditure. The impact of insecurity on tourism and depressed rainfall which could affect exports and agricultural production respectively remains a risk to the growth outlook. Appropriate measures to safeguard macroeconomic stability should these risks materialize should be pursued. 10 3 FISCAL POLICY AND BUDGET FRAMEWORK 3.1 Background The county government will pursue prudent fiscal policy to ensure macroeconomic stability. In addition, our fiscal policy objective will provide an avenue to support economic activity while allowing for implementation of devolution mandates within a sustainable public finances management system. With respect to revenue, the county will maintain a strong revenue effort over the medium term. Measures to achieve this effort include improved tax and cess compliance with enhanced administrative measures and adoption of national and international revenue enhancement best practices. In addition, the county Government will rationalize existing tax and cess incentives, and expanding revenue base. The county Government reviewed all other tax and cess policies as per the approved Finance act 2013, in order to simplify and modernize them. On the existing mining activities and the prospects on the exploration of minerals in our country, the county Government has developed a comprehensive policy and legislative framework covering licensing, revenue sharing, taxation and sustainable use of the resources. This will ensure that we derive maximum and sustainable benefit from these natural resources. On the expenditure side, the county Government will continue with rationalization of expenditure to improve efficiency and reduce overlaps and wastage. Expenditure management will be strengthened with implementation of the Integrated Financial Management Information System (IFMIS) and other appropriate financial management systems across all Departments. In addition, the PFM Act, 2012 is expected to accelerate reforms in expenditure management system at the county. 3.2 CFSP Alignment to Budget Policy Statement The county CFSP’s strategic priorities and policy goals have been aligned with the national Budget Policy Statement (BPS) 2015 which classifies the national strategic priorities and policy goals into five broad pillars, namely; Pillar 1: Creating a Conducive Business Environment for Employment Pillar II: Agricultural Transformation and Food Security Pillar III: Transport, Logistics, Energy and Water for Inclusive Growth Pillar IV: Access to Quality Social Services Pillar V: Further Entrenching Devolution for Better Service Delivery 11 The CFSP’s strategic priorities and policy goals have therefore been aligned as follows; Strategic Priority 1: Enhancing Public Private Partnerships and partner collaborations Strategic Priority 2: Agricultural Transformation and Food Security Strategic Priority 3: Infrastructural investments Strategic Priority 4: Access to quality Social Services Strategic Priority 5: Enhancing service delivery through devolution 3.3 Risk to implementation of County Strategic priorities aligned to BPS The risks to the outlook for 2015/16 and the medium-term include continued weak growth in advanced economies that will impact negatively country’s exports and tourism activities. Further, geopolitical uncertainty on the international oil market will slow down the manufacturing sector. Public expenditure pressures, especially recurrent expenditures, pose a fiscal risk. Wage pressures occasioned by SRC circulars on allowances, loans and mortgage may limit continued funding for development expenditure. Other risks to the 2015/16 financial year’s budget include challenges in revenue performance as the county continues to put structures in place, seal loop holes and expand the revenue base. The current process of county restructuring, recruitment and rationalization of staff is expected to exert pressure on wage expenditures. 3.4 Overview of 2015 Medium-Term Fiscal Policy The 2015 Medium-Term Fiscal Policy aims at supporting rapid economic growth and ensuring effective delivery of public goods and services in a sustainable manner as well as providing benchmarks against which budgetary developments can be assessed over time. It also reflects the impacts of past budgetary commitments as well as the cost of future new policy measures. Since 2013/14 fiscal year, fiscal performance has been generally satisfactory, despite the challenges emanating from shortfall in local revenues sources. On the expenditure side, the County Government had to incur higher expenditure on salaries mainly accruing to staff devolved from the National Government whose personal emoluments were not captured in the initial stages of the budget preparation for 2014/15 and implications of the SRC circular on daily subsistence allowance. Another challenge experienced in budget execution was the low level of absorption of funds. This was due to delays in the disbursement of funds from the National Government. However, the county has enough capacity to handle all the devolved functions outlined in the Constitution. Adjustments to the original budget were approved by County Assembly through a supplementary budget in November, 2014. 12 3.5 Fiscal Performance 3.5.1 Fiscal policy Fiscal policy will continue to support economic activity within a context of sustainable public financing. Collection for the first half of the year from local revenue sources amounted to Kshs 46M which translates to 36% of the targeted budget figures i.e. 132M. The underperformance in revenue base was largely on account of agriculture produce cess, market fees and livestock auction fees. In order to improve performance in revenue collection, the county has undertaken various strategies, namely; • Introducing information technology based systems that ensures compliances and eradicates corrupt practices in local revenue collection • Partnering with financial institutions on revenue collection and remittances to maximize on revenue collection • Training workers on revenue handling and collection strategies On management of expenditure, the proposed budget will be guided by Programme Based Budgeting (PBB) concept which is an approach and process that relates resources to proposed and actual results. PBB budgets funds based on the relationship between program funding levels and expected results from the programs. These, together with monitoring and evaluation concept and expenditure controls such as audits and enforcement of cost benchmarks for all projects and consumables, will achieve the intended impacts. 3.5.2 Fiscal Reforms and Policy The medium term fiscal framework aims at striking an appropriate balance between fiscal consolidations and supporting devolved service delivery, all these within a sustainable public financing as per the county fiscal strategy paper which emphasizes the following strategies; • Reduction in recurrent expenditure to devote more resources to capital expenditure • Respect and observance of the fiscal rules set out in the PFM law and its regulations is important and necessary to entrench fiscal discipline. • Continued reforms in expenditure management and revenue collection so as to create fiscal space for spending on infrastructure and other priority development programmes. • Expenditure efficiency and effective implementation of budget programs through enforcement of cost benchmarks for all projects and consumables. • Improving the productivity of expenditure while at the same time ensuring that adequate resources are available for operations and maintenance. 13 • Increase the absorption of allocated resources which will in turn spur economic growth and further improve budget credibility. This will be done through strengthening ongoing reform engagements with development partners as well as strengthening project planning and management. The county government understands that the fiscal stance it takes at the moment will have implications in the future generations and therefore shall moderate spending to help assure debt sustainability and intergenerational equity in line with the constitution and the Public Finance Management (PFM) Act 2012. 3.6 2015/16 Budget Framework 3.6.1 Revenue Projections Table 1: Revenue Projections Revenue type 2014/15 2015/16 Estimates Estimates Game park Fees - Animal stock sale fees 2,446,006 2,557,895 Produce & Other cess 31,563,556 33,007,390 Single Business Permit 13,807,204 14,438,797 Plot rent/Rates 4,516,280 4,722,871 Bus park/motor bikes fees 3,500,000 3,660,103 Trade applications fees 1,500,000 1,568,616 Slaughter fees 1,200,000 1,254,892 House rent/Stall/Ground. 510,000 533,329 Conservancy fees 400,000 418,297 Plan approval fees 167,700 175,371 Clearance fees 74,210 77,605 Hide & skins 100,005 104,580 Promotion/advert 822,900 860,542 Tender Document 60,000 62,745 Hire of Grater & other machinery 2,005,380 2,097,114 Industrial rates - - Trade - 92,182 Fines 300,000 313,7s23 Fif funds 49,672,495 51,944,699 Vsd funds 5,000,000 5,228,719 Liquor license application 1,000,000 1,045,744 OTHERS 1,854,264 1,939,085 Water Department 2,000,000 2,091,487 Health services - 12,340,233 Youth affairs and sports 500,00 52,287 Veterinary - Lands - Housing - Cooperative development - Wight’s and measures 500,000 522,872 14 Tourism 5,000,000 5,228,719 Market fees & others 3,500,000 3,660,103 GRAND TOTAL (REVENUE) 132,000,000 150,000,000 Table 2: Revenue for 1st Half of 2014/15 ACTUAL RECEIPT Revenue Source Budgeted Amount Percent ( % ) Total Game Park Fees - - 0% Animal Stock Sale Fees 2,446,006 1,310,550 54% Produce & Other Cess 31,563,556 14,195,710 45% Single Business Permit 13,807,204 2,118,955 15% Plot Rent/ Rates 4,516,280 819,202 18% Bus park/motorbikes 3,500,000 1,712,085 49% Trade Application 1,500,000 380,370 25% House/stall/ground 510,000 138,400 27% Conservancy 400,000 130,160 33% Plan approval 167,700 142,490 85% Slaughter fees 1,200,000 766,805 64% Clearance 74,210 25,555 34% Hides and Skins 100,005 70,450 70% Promotion/advert 822,900 84,700 10% Tender Document 60,000 1,000 2% Hire of Grater 2,005,380 6,000 0% Industrial rates - 0 0% Miscellaneous 65,826,759 22,799,150 35% Market Fees & Others 3,500,000 2,263,745 65% Total 132,000,000 46,965,327 36% 3.6.2 Expenditure Forecasts Table 3: Expenditure Analysis for 1st Half of 2014/2015 DEPARTMENT RECURRENT DEVELOPMENT TOTAL OFFICE OF GOVERNOR 68,628,455 19,874,227 88,502,682 EXECUTIVE ADMINISTRATION 30,792,378 0 30,792,378 COUNTY ASSEMBLY 207,797,049 14,485,860 222,282,909 FINANCE AND ECONOMIC PLANNING 88,085,161 6,033,039 94,118,200 PUBLIC WORKS, ROADS AND TRANSPORT 15,963,266 244,240,125 260,203,391 EDUCATION AND VOCATIONAL TRAINING 92,053,571 32,336,532 124,390,103 YOUTH AFFAIRS, SPORTS, CULTURE, GENDER AND SOCIAL 14,374,811 5,612,680 19,987,491 SERVICES HEALTH 555,212,476 92,776,650 647,989,126 LANDS, HOUSING & PHYSICAL PLANNING 9,706,549 12,062,390 21,768,939 15 TRADE, TOURISM, INDUSTRIALIZATION AND CO-OPERATIVE 10,981,837 25,250,605 36,232,442 DEVELOPMENT WATER & ENVIRONMENT 20,689,923 63,930,485 84,620,408 AGRICULTURE, LIVESTOCK, VETERINARY AND FISHERIES. 84,300,393 47,172,507 131,472,900 COUNTY PUBLIC SERVICE BOARD 26,848,714 - 26,848,714 ICT AND PUBLIC SERVICE 26,593,479 5,059,840 31,653,319 TOTALS 1,252,028,06 568,834,940 1,820,863,002 2 3.6.3 Deficit, Debt policy and Debt Sustainability With the coming of the devolved system, legal framework has been laid to guide deficit and debt policy of the county. Currently the county has no public debt but strategies should be laid down in subsequent financial years to address debt sustainability since the county will be anticipating deficit financing that will exist in the budget 3.6.4 Compliance with Fiscal Responsibility Principles Fiscal responsibility is important since the constitution requires the county government to progressively provide for a minimum basic standard of economic and social rights to its citizens with available resources as per finance act in order for spending to increase on a sustainable basis to meet the basic needs, there is need to increase revenue yield through efficient collection and widening of revenue sources therefore it is imperative to reform and modernize the revenue collection to ensure stability. So far, the fiscal performance has been generally satisfactory, despite the challenges with shortfall in revenues, the transition financial demands and increased expenditure pressures, the government will ensure strict adherence to PFM act to comply with fiscal principles. 3.7 Challenges in County Public Finance Management In the Financial year 2014/2015, the county cumulatively budgeted for Kshs. 3,078,000,269 to finance its expenditure. The budget was financed by the National sharable revenue of Kshs. 2,845,235,405, conditional grants of Kshs. 18,420,000 and Kshs. 132,023,379. In implementing its functions, the County faced the following challenges; i. Increase in wage bill. ii. Budget processes being determined by external factors that are not controlled directly by the county treasury e.g. County Allocation of revenue Bill, County Assembly ceiling determination by CRA. iii. Delay in disbursement of county development share by the national Treasury. iv. Low absorption of development funds by departments. v. Under performance in local revenue collection. 16 4 MEDIUM TERM EXPENDITURE FRAMEWORK 4.1 Background Going forward, and in view of the macroeconomic circumstances since the inauguration of the county government and the limited resources, MTEF budgeting will entail adjusting non-priority expenditures to cater for the priority ones. The priority social sectors, education and health, will continue to receive adequate resources though they are required to utilize the allocated resources more efficiently to generate fiscal space to accommodate other strategic interventions in their sectors. The economic sectors including agriculture and livestock will receive increasing share of resources to boost agricultural productivity and initiating value addition ventures as the county deals with threats of food insecurity and poor market returns for agricultural produce. With the County Government’s commitment in improving infrastructure countywide, the share of resources going to priority physical infrastructure sector, such as roads, energy and water and irrigation, will continue to rise over the medium term. This will help the sector provide reliable and affordable energy, as well as increased access to water and development of irrigation projects across the county. All the other sectors will continue to receive adequate resources in line with our county’s commitment to a balanced sector development so as to enhance the quality of life for the residents of the county 4.2 Resource envelop Table 4: Resource Envelop Revenue Source 2014/2015 FY 2015/2016 FY CRA Equitable Share 2,845,235,405 3,191,548,394 LOCAL REVENUE 132,023,379 150,000,000 Balance B/F (Savings) 43,521,484 FIF Funds 38,800,000 Conditional Health Sector Support 18,420,000 18,420,000 Grants Programme/DANIDA Kenya Health Sector Support - 19,355,600 Project/World Bank TOTAL REVENUE 3,078,000,268 3,379,323,994 17 4.3 Collaboration with National Government Close collaboration between our county and the national government in terms of implementing the national development agenda and critical policy directives will be encouraged to ensure that devolution achieves the objectives of better service delivery and rapid local economic development as well as jobs creation in line with our Vision 2030. It is therefore imperative to develop strategic networking and collaborations based on the needs and policy direction of the county as per the CIDP, the county will collaborate with the national government in the following areas; 4.3.1 Conditional Allocations from Development Partners EMC will be allocated additional conditional allocations of Ksh 88,515,600 from the loans and grants received from development partners and the Government counterpart funding derived from the National Government’s share as shown below. Table 5: Conditional Allocations Resources from Development Objectives Amount Remarks Development Partner Partners Health Sector Government of • To improve service 18,420,000 Support Denmark delivery of essential Programme health services IDA 19,355,600 • To improve the effectiveness of planning, financing and procurement of pharmaceuticals and medical supplies Total 37,775,600 4.3.2 County Lands Management Board: The county government will collaborate with the CLMB to ensure efficient land management and secure land tenure. In this regard, the county will facilitate the board with necessary logistical support to ensure efficient and effective service delivery 4.3.3 County Policing Authority: Plans are underway for constitution of County Policing Authority; the Authority will identify security issues, and advise the security agencies in the county on strategies to address the issues. The county will facilitate the authority with all the necessary support for its operations. 18 4.3.4 County Education Board: Education sector has undergone significant legal, policy and institutional reforms which have resulted in establishment of new institutions, County Education Board is one of such institutions recently established thus its operationalization will require considerable resources if it is to deliver on its mandate as expected. The county will therefore collaborate closely with the ministry of education to ensure the board is up and running. 4.3.5 Disaster Management and Reduction: Since drought risk management is so closely entwined with sustainable development, it is inevitably a shared function of both the national and the county governments thus both levels of government will initiate the prerequisite mechanisms to mitigate and manage disasters. 4.4 Key Priorities for the 2015/16 Medium Term Budget 4.4.1 Sector Priorities (Programmes and Sub-Programmes) Development initiatives that will be implemented in the coming Fiscal Years are contained in the County Integrated Development Plan (CIDP). All the sectors in the county had priority development proposals identified. These proposals will drive budget process for the county in the respective sectors. These sector priorities include; a. Enhancing Public Private Partnerships and partner collaborations Enhanced development cooperation, networking and collaborations through Public Private Partnerships (PPP) approach which will ensure faster development, replication of best development practices and increasing the network base that will spur development even further b. Agricultural Transformation and Food Security The department of Agriculture will develop a comprehensive transformation strategy and a time-bound measurable action plan focusing on unlocking agricultural productivity among smallholder and livestock production enhancement initiatives as well as commercial farmers. The strategy will also prioritize investments in; research and extension services, soil management, making available high yielding seeds, zoning and earmarking specific crops for highest yields through cash crops development, productivity and technology adoption, Kerio Valley irrigation strategy, horticultural development, fish farming promotion and support, value addition and marketing, and value chain linkages, wide application of appropriate technology and mechanization to achieve the highest level of production as well as re-organization of farmers into viable cluster groups to reach economies of scale. 19 c. Infrastructural Development Focusing on infrastructural developments including those for roads, energy and office buildings for administrative purposes arising from the devolution responsibilities. These infrastructural developments are geared towards market accessibilities, electricity for value addition industries and office space for enhanced service delivery d. Access to quality Social Services These focused investments include; in education ECDE improvement strategy, schools infrastructural enhancement, vocational and tertiary training strategy and quality enhancement in educational institutions are amongst flagships that will be focused on. In Health and Sanitation, improvement and upgrading of health facilities, service delivery enhancement, community health strategy, efficient drugs and commodities management strategy and cemetery and mortuaries will be focused on. e. Enhancing service delivery through devolution Focus on devolving services further to the sub-counties and wards in an equitable manner. 4.5 Medium-Term Expenditure Estimates Table 6: Medium-Term Expenditure Estimates Department/ Approved & Ceilings Projections Sector Description Approved Ceiling Projection Projection 2014/15 2015/16 2016/17 2017/18 Office of The Rec 128,264,683 81,188,392 94,584,477 111,609,683 Governor Dev 70,122,337 43,000,000 50,095,000 59,112,100 Administration Rec 47,242,556 24,228,562 28,226,275 33,307,004 Dev 0 0 0 0 County Assembly Rec 287,022,428 263,726,887 307,241,823 362,545,352 Dev 26,226,173 30,000,000 34,950,000 41,241,000 Finance & Rec 125,493,092 161,987,110 188,714,983 222,683,680 Economic Dev 9,827,831 40,000,000 46,600,000 54,988,000 Planning Roads, Public Rec 48,612,481 69,651,898 81,144,462 95,750,465 Works & Dev 262,062,031 234,798,699 273,540,484 322,777,771 Transport Youth, Sports, Rec 25,080,948 29,322,322 34,160,505 40,309,396 Culture, Gender Dev 86,317,331 105,952,151 123,434,256 145,652,422 Education and Rec 129,469,835 163,679,018 190,686,056 225,009,546 Technical Dev 94,645,231 111,713,478 130,146,202 153,572,518 Training 20 Health Services Rec 862,647,159 1,024,742,835 1,193,825,403 1,408,713,976 Dev 143,950,302 143,253,138 166,889,906 196,930,089 Water, Lands, Rec 65,737,881 70,624,857 82,277,958 97,087,991 Housing, & Dev 163,912,590 110,460,593 128,686,591 151,850,177 Physical Planning Trade, Tourism, Rec 39,793,951 40,917,462 47,668,843 56,249,235 Co-operations & Dev 60,995,055 65,414,064 76,207,385 89,924,714 Wildlife Agriculture Rec 138,243,252 182,309,323 212,390,361 250,620,626 Dev 96,233,388 142,887,736 166,464,212 196,427,771 ICT & Public Rec 104,683,558 140,035,660 163,141,544 192,507,022 Service Dev 28,869,228 59,000,000 68,735,000 81,107,300 County Public Rec 32,546,948 37,929,807 44,188,226 52,142,106 Service Board Dev 0 2,500,000 2,912,500 3,436,750 TOTAL Rec 2,034,838,772 2,290,344,135 2,668,250,918 3,148,536,083 Dev 1,043,161,497 1,088,979,859 1,268,661,536 1,497,020,612 4.6 Baseline Ceilings The baseline estimates reflects the current departmental spending levels. In the recurrent expenditure category, expenditures on compensation of employees which accounts for about 53.3 percent of the resource envelope take the first charge. Expenditure on operations and maintenance accounts for 11.6 percent of the resource envelope Overall, recurrent expenditure on compensation of employees, and operations and maintenance account for 64.9 percent of the projected resource envelope. The balance of 25.1 percent from total resource envelope are the resources available to fund planned development programmes. • Development expenditure allocations are shared out amongst departments on the basis of the County Integrated Development Plan (CIDP) and Annual Development Plan (ADP) as well as other strategic objectives and policy goals identified in this CFSP which forms the allocation guidelines outlined below; • Conditional allocations from the national governments: departments/sectors with conditional allocations are considered for more allocations in development for those areas that would maximize the usage of the conditional allocations. However, if the conditional allocations are recurrent in nature, necessary reductions in allocations have been considered • On-going projects: emphasis is given to completion of on-going projects and in particular infrastructure projects and other projects with high impact on poverty reduction and equity. 21 • Strategic objectives and policy goals: priority is also given to policy interventions covering the entire county and those that have huge implications in spurring growth in other departments/sectors 4.6.1 2015/2016 CFSP Allocation Analysis Expenditure Type Amount Percentage of Budget Compensation to Employees 1,887,201,704 55.8 Special O&M 277,488,600 8.2 Normal O&M 125,653,831 3.7 Development 1,088,979,859 32.2 Total 3,379,323,994 100.0 Deficit 0 0.0 22 5 CHAPTER FIVE: CONCLUSION The fiscal outlook presented in this County Fiscal Strategy Paper will seek to achieve the objectives outlined in the PFM Act, 2012 and lay the ground for 2015/2016 financial year in terms of preparing the budget. The ceilings for each department will be set by this document. Fiscal discipline will be important in ensuring proper management of funds and delivery of expected outputs. Effective and efficient utilization of funds will be crucial in ensuring that the county to delivers on its functions. In all the considerations, it is the aim of the county at large that value for money is realised and members of the public get the service the government owes them. 23 6 ANNEXES Annex 1: Departmental/Sector Ceilings 2014/15 – 2017/18 Department/ Approved & Ceilings Projections % Share of Total Revenue Sector Description Approved Ceiling Projection Projection Approved CFSP Ceiling 2015/16 2014/15 2015/16 2016/17 2017/18 2014/15 Office of The Rec 128,264,683 81,188,392 94,584,477 111,609,683 4.2 2.33 Governor Dev 70,122,337 43,000,000 50,095,000 59,112,100 2.3 1.23 Administration Rec 47,242,556 24,228,562 28,226,275 33,307,004 1.5 0.69 Dev 0 0 0 0 0 0.00 County Assembly Rec 287,022,428 263,726,887 307,241,823 362,545,352 9.3 7.56 Dev 26,226,173 30,000,000 34,950,000 41,241,000 0.9 0.86 Finance & Rec 125,493,092 161,987,110 188,714,983 222,683,680 4.1 4.64 Economic Planning Dev 9,827,831 40,000,000 46,600,000 54,988,000 0.3 1.15 Roads, Public Rec 48,612,481 69,651,898 81,144,462 95,750,465 1.6 2.00 Works & Dev 262,062,031 234,798,699 273,540,484 322,777,771 8.5 6.73 Transport Youth, Sports, Rec 25,080,948 29,322,322 34,160,505 40,309,396 0.8 0.84 Culture, Gender Dev 86,317,331 105,952,151 123,434,256 145,652,422 2.8 3.04 Education and Rec 129,469,835 163,679,018 190,686,056 225,009,546 4.2 4.69 Technical Training Dev 94,645,231 111,713,478 130,146,202 153,572,518 3.1 3.20 Health Services Rec 862,647,159 1,024,742,835 1,193,825,403 1,408,713,976 28 29.36 Dev 143,950,302 143,253,138 166,889,906 196,930,089 4.7 4.10 Water, Lands, Rec 65,737,881 70,624,857 82,277,958 97,087,991 2.1 2.02 Housing, & Dev 163,912,590 110,460,593 128,686,591 151,850,177 5.3 3.16 Physical Planning Trade, Tourism, Rec 39,793,951 40,917,462 47,668,843 56,249,235 1.3 1.17 Co-operations & Dev 60,995,055 65,414,064 76,207,385 89,924,714 2 1.87 Wildlife 24 Agriculture Rec 138,243,252 182,309,323 212,390,361 250,620,626 4.5 5.22 Dev 96,233,388 142,887,736 166,464,212 196,427,771 3.1 4.09 ICT & Public Rec 104,683,558 140,035,660 163,141,544 192,507,022 3.4 4.01 Service Dev 28,869,228 59,000,000 68,735,000 81,107,300 0.9 1.69 County Public Rec 32,546,948 37,929,807 44,188,226 52,142,106 1.1 1.09 Service Board Dev 0 2,500,000 2,912,500 3,436,750 0 0.07 TOTAL Rec 2,034,838,772 2,290,344,135 2,668,250,918 3,148,536,083 66 65.6 Dev 1,043,161,497 1,088,979,859 1,268,661,536 1,497,020,612 34 31.2 25 Annex 2: Recurrent Departmental/Sector Ceilings 2014/15 – 2017/18 Sector Approved Ceiling Projections % Share of Total Revenue Approved Ceiling Projection Projection Approved Ceiling 2014/15 2015/16 2016/17 2017/18 2014/15 2015/16 Office of The Governor 128,264,683 81,188,392 94,584,477 111,609,683 4.2 2.33 Administration 47,242,556 24,228,562 28,226,275 33,307,004 1.5 0.69 County Assembly 287,022,428 263,726,887 307,241,823 362,545,352 9.32 7.56 Finance & Economic Planning 125,493,092 161,987,110 188,714,983 222,683,680 4.1 4.64 Roads, Public Works & 48,612,481 69,651,898 81,144,462 95,750,465 1.6 2.00 Transport Youth, Sports, Culture, Gender 25,080,948 29,322,322 34,160,505 40,309,396 0.8 0.84 Education And Technical 129,469,835 163,679,018 190,686,056 225,009,546 4.2 4.69 Training Health Services 862,647,159 1,024,742,835 1,193,825,403 1,408,713,976 28 29.36 Water, Lands, Hsing, & P. 65,737,881 70,624,857 82,277,958 97,087,991 2.1 2.02 Planning Trade, Tourism, Co-operations 39,793,951 40,917,462 47,668,843 56,249,235 1.3 1.17 & Wildlife Agriculture 138,243,252 182,309,323 212,390,361 250,620,626 4.5 5.22 ICT & Public Service 104,683,558 140,035,660 163,141,544 192,507,022 3.4 4.01 County Public Service Board 32,546,948 37,929,807 44,188,226 52,142,106 1.1 1.09 TOTAL 2,034,838,772 2,290,344,135 2,668,250,918 3,148,536,083 66 65.6 26 Annex 3: Development Departmental/Sector Ceilings 2014/15 – 2017/18 Department/ Approved Ceilings Projections % Share of Total Revenue Sector Approved Estimate Ceilings Projection Projection Approved CFSP Ceiling 2014/15 2015/16 2016/17 2017/18 2014/15 2015/16 Office of The 96,348,510 43,000,000 50,095,000 59,112,100 3.1 1.2 Governor Administration 0 0 0 0.0 County Assembly 26,226,173 30,000,000 34,950,000 41,241,000 0.8 0.9 Finance & Economic 9,827,831 40,000,000 46,600,000 54,988,000 0.3 1.1 Planning Roads, Public Works 262,062,031 234,798,699 273,540,484 322,777,771 8.5 6.7 & Transport Youth, Sports, 86,317,331 105,952,151 123,434,256 145,652,422 2.8 3.0 Culture, Gender Education and T. 94,645,231 111,713,478 130,146,202 153,572,518 3 3.2 Training Health Services 143,950,302 143,253,138 166,889,906 196,930,089 4.7 4.1 Water, Lands, 163,912,590 110,460,593 128,686,591 151,850,177 5.3 3.2 Housing, & Physical Planning Trade, Tourism, Co- 60,995,055 65,414,064 76,207,385 89,924,714 2 1.9 operations & Wildlife Agriculture 96,233,388 142,887,736 166,464,212 196,427,771 3.1 4.1 ICT & Public Service 28,869,228 59,000,000 68,735,000 81,107,300 0.9 1.7 County Public - 2,500,000 2,912,500 3,436,750 0 0.1 Service Board TOTAL 1,069,387,670 1,088,979,859 1,268,661,536 1,497,020,612 35 31.2 27 Annex 4: Departmental/Sector Ceilings 2015/16 Department/ Sector Expenditure Description Proposed Ceiling 2015/16 % Share of Total Revenue Office of The Governor Rec 81,188,392 2.33 Dev 43,000,000 1.23 Administration Rec 24,228,562 0.69 Dev 0 0.00 County Assembly Rec 263,726,887 7.56 Dev 30,000,000 0.86 Finance & Economic Planning Rec 161,987,110 4.64 Dev 40,000,000 1.15 Roads, Public Works & Transport Rec 69,651,898 2.00 Dev 234,798,699 6.73 Youth, Sports, Culture, Gender Rec 29,322,322 0.84 Dev 105,952,151 3.04 Education and Technical Training Rec 163,679,018 4.69 Dev 111,713,478 3.20 Health Services Rec 1,024,742,835 29.36 Dev 143,253,138 4.10 Water, Lands, Housing, & Physical Planning Rec 70,624,857 2.02 Dev 110,460,593 3.16 Trade, Tourism, Co-operations & Wildlife Rec 40,917,462 1.17 Dev 65,414,064 1.87 Agriculture Rec 182,309,323 5.22 Dev 142,887,736 4.09 ICT & Public Service Rec 140,035,660 4.01 Dev 59,000,000 1.69 County Public Service Board Rec 37,929,807 1.09 Dev 2,500,000 0.07 TOTAL Rec 2,290,344,135 65.6 Dev 1,088,979,859 31.2 28 Annex 5: Summary Departmental/Sector Ceilings 2015/16 Details FY 2014/2015 ALLOCATIONS FY 2015/2016 CEILINGS ESTIMATES RECURRENT DEVELOPMENT TOTAL RECURRENT DEVELOPMEN TOTAL T Office of The Governor 128,264,683 70,122,337 198,387,020 81,188,392 43,000,000 124,188,392 Administration 47,242,556 0 47,242,556 24,228,562 0 24,228,562 County Assembly 287,022,428 26,226,173 313,248,601 263,726,887 30,000,000 293,726,887 Finance & Economic 125,493,092 9,827,831 135,320,923 161,987,110 40,000,000 201,987,110 Planning Roads, Public Works & 48,612,481 262,062,031 310,674,512 69,651,898 234,798,699 304,450,597 Transport Youth, Sports, Culture, 25,080,948 86,317,331 111,398,279 29,322,322 105,952,151 135,274,473 Gender Education and Technical 129,469,835 94,645,231 224,115,066 163,679,018 111,713,478 275,392,496 Training Health Services 862,647,159 143,950,302 1,006,597,461 1,024,742,835 143,253,138 1,167,995,973 Water, Lands, Housing, 65,737,881 163,912,590 229,650,471 70,624,857 110,460,593 181,085,450 & Physical Planning Trade, Tourism, Co- 39,793,951 60,995,055 100,789,006 40,917,462 65,414,064 106,331,526 operations & Wildlife Agriculture 138,243,252 96,233,388 234,476,640 182,309,323 142,887,736 325,197,059 ICT & Public Service 104,683,558 28,869,228 133,552,786 140,035,660 59,000,000 199,035,660 County Public Service 32,546,948 0 32,546,948 37,929,807 2,500,000 40,429,807 Board TOTAL 2,034,838,772 1,043,161,497 3,078,000,269 2,290,344,135 1,088,979,859 3,379,323,994 29 Annex 6: Summary Recurrent Departmental/Sector Ceilings 2015/16 Department/ No. of Personal Emoluments Operations & Maintenance Total Sector Staff Special O&M Normal O&M Total O&M Office of The Governor 21 54,795,365 18,486,250 7,906,777 26,393,027 81,188,392 Administration 10 18,050,451 3,112,500 3,065,611 6,178,111 24,228,562 County Assembly 0 195,000,000 0 68,726,887 68,726,887 263,726,887 Finance & Economic 221 135,483,025 22,842,250 3,661,835 26,504,085 161,987,110 Planning Roads, Public Works & 63 43,685,461 22,508,750 3,457,687 25,966,437 69,651,898 Transport Youth, Sports, Culture, 14 18,714,126 8,657,500 1,950,696 10,608,196 29,322,322 Gender Education and Technical 604 121,560,336 39,722,000 2,396,682 42,118,682 163,679,018 Training Health Services 930 944,920,514 69,650,600 10,171,721 79,822,321 1,024,742,835 Water, Lands, Housing, & 83 51,568,518 15,411,250 3,645,089 19,056,339 70,624,857 Physical Planning Trade, Tourism, Co- 34 32,581,497 6,202,500 2,133,465 8,335,965 40,917,462 operations & Wildlife Agriculture 233 174,212,871 3,823,250 4,273,202 8,096,452 182,309,323 ICT & Public Service 138 76,613,029 54,490,000 8,932,631 63,422,631 140,035,660 County Public Service Board 11 20,016,511 12,581,750 5,331,546 17,913,296 37,929,807 TOTAL 2,362 1,887,201,704 277,488,600 125,653,831 403,142,431 2,290,344,135 30 Annex 7: Summary of Recurrent 2015/16 Programmes & Sub-Programmes Department Proposed Programmes Sub - Programmes Sub-Programme Programme Department Ceilings Total Total 2015/16 Office of The 81,188,392 General Administration General Administration and Support Services 70,438,392 70,438,392 Governor and Support Services Deputy Governor’s Services Resource Mobilization Services 1,000,000 1,000,000 Communication Services Publicity Services 6,500,000 6,500,000 Public Sector Advisory Economic and Political Advisory services 500,000 Services County Policing Authority and Budget & 750,000 1,250,000 Economic forum Services County Attorney services County Attorney Services 1,500,000 1,500,000 County Secretary Services County Executive Services Coordination 500,000 1,512,500 County Public Service Coordination 1,012,500 County Protocol and County Protocol Services and liason services 1,000,000 1,000,000 Liaison Services Finance & 161,987,110 General administration & General administration & support services 132,331,110 132,331,110 Economic s upport services Planning Accounting management servicers - Pay roll Management - Budget Budget Formulation, Coordination and 8,000,000 8,000,000 Management Economic Planning Monitoring & Evaluation 4,500,000 16,156,000 County Statistics and data management 3,000,000 Development Planning Services 8,156,000 Documentation and Library services 500,000 Revenue Finance Bill processes 1,000,000 1,000,000 Payroll Payroll Management Services 1,000,000 1,000,000 Procurement Procurement Processes Services 1,000,000 1,000,000 Audit Audit Management Services 2,500,000 2,500,000 31 Department Proposed Programmes Sub - Programmes Sub-Programme Programme Department Ceilings Total Total 2015/16 Roads, Public 69,651,898 General administration and General administration and support services 69,851,900 69,851,900 Works & support services Transport Youth, Sports, 29,322,322 General administration and General administration and support services 24,642,780 24,642,780 Culture, Gender support services Sports development Sports Support and talent development 3,500,000 3,500,000 Culture and heritage Culture and Heritage 1,179,542 1,179,542 Education and 163,679,018 General Administration & General administration & support services 124,679,018 127,929,018 Technical Support Services Research, Documentation & Exam Services 2,500,000 Training County Education Board Services 750000 County Bursary Scheme 20,000,000 Education Bursary, 35,750,000 Scholarships 10,000,000 Scholarships and loans Education loans 5,000,000 Health Services 1,024,742,835 Health Administration Health Administrative Services 956,367,235 956,367,235 services Health Monitoring and Information Management Health Sector Support 37,775,600 37,775,600 Curative and Rehabilitative Nursing and Ambulance Services 28,600,000 28,600,000 Services Preventive and Promotive Community Health Services 2,000,000 Services Environmental Health and Sanitation 2,000,000 Maternal Child Health and Nutrition Services 0 Water, 70,624,857 General Administration & General administration & support services 54,124,857 59,124,857 Environment, Support Services Lands, Housing, CLMB 5,000,000 Physical 32 Department Proposed Programmes Sub - Programmes Sub-Programme Programme Department Ceilings Total Total 2015/16 Planning and Water Supply Services Water Supply Services 4,000,000 4,000,000 Natural Land survey and Physical Land survey 3,500,000 3,500,000 Resources planning Physical Planning Environmental protection Environmental protection and conservation and conservation Housing Development Housing Development Town & Urban areas Management of towns & urban Areas 4,000,000 4,000,000 Administration Beautification of towns & urban Areas Trade, Energy, 40,917,462 General Administration & General administration & support services 34,917,462 34,917,462 Tourism, Co- Support services operative Tourism Tourism infrastructure development Development Tourism Marketing and Promotion 6,000,000 6,000,000 Trade Trade development Cooperatives Development Agricultural Marketing Services and Value addition Cooperatives & SACCOs credit facility support Renewable Energy Investments Industrialization SMEs Development and promotion Agriculture 182,309,323 General Administration& General administration& support services 178,309,323 178,309,323 Support Services Crop Production Horticultural sector support Agricultural shows & trade exhibitions Cash crop development & promotion Research and Extension Services 4,000,000 4,000,000 Farmers Loans Services Irrigation development Irrigation development 33 Department Proposed Programmes Sub - Programmes Sub-Programme Programme Department Ceilings Total Total 2015/16 Fisheries Production Fisheries Development Services Livestock Development Livestock Multiplication Services Dairy Sector Improvement Livestock Marketing Infrastructure Development Veterinary Animal Breeding Services Disease Surveillance and Control ICT & Public 140,035,660 General administration and General Administration and Support Services 89,285,660 129,285,660 Service support services Staff Mortgage 40,000,000 ICT Infrastructure and ICT Infrastructure and Services 750,000 750,000 Services Human Resource Human Resources Training and Development - Performance Management Services 3,000,000 3,000,000 County Administrative Sub-counties and ward Administration Units Services 7,000,000 7,000,000 Infrastructural Development (ward offices) County Public 37,929,807 General administration and General administration and support services 32,723,057 32,723,057 Service Board support services Personnel services 5,206,750 5,206,750 Infrastructural Infrastructural Development Development Grand total 2,290,544,135 2,290,544,135 2,290,544,135 34 Annex 8: Summary of Development 2015/16 Programmes & Sub-Programmes Department Proposed Programmes Sub - Programmes Sub-Programme Programme Department Allocation Total Ceilings 2015/16 Office of The 43,000,000 General Administration General Administration and Support 0 G overnor and Support Services Services County Executive Management of CEC Affairs, Policy Services Management and Public Participation Governor's Residence 20,000,000 20,000,000 County Headquarters 20,000,000 20,000,000 Feasibility Studies 3,000,000 3,000,000 Deputy Governor’s Resource Mobilization Services Services Communication Services Publicity Services Public Sector Advisory Chief of Staff Services and Support Services Economic and Political Advisory Services County Policing Authority and Budget & Economic forum Services County Attorney County Attorney Services services Executive 0 General Administration General Administration and Support Administration and Support Services Services (County County Secretary County Executive Services Coordination Secretary) Services County Public Service Coordination County Protocol and County Protocol Services and Liaison Liaison Services Services County Assembly 30,000,000 Infrastructural Infrastructural Development 30,000,000 30,000,000 Development Finance & 40,000,000 General administration General administration & support services Economic & support services 35 Department Proposed Programmes Sub - Programmes Sub-Programme Programme Department Allocation Total Ceilings 2015/16 Planning Finance and Accounts Finance information systems Accounting management servicers Pay roll Management Budget Budget Formulation, Coordination and Management Economic Planning Monitoring & Evaluation County Statistics and data management Development Planning Services Documentation and Library services Revenue Revenue enhancement and infrastructure 15,000,000 15,000,000 Payroll Payroll Management Services Procurement Procurement Processes Services Audit Audit Management Services Emergency Response General Emergency Response services 15,000,000 25,000,000 Disaster Mitigation infrastructure 10,000,000 Roads, Public 234,798,699 General administration General administration and support Works & and support services services Transport Public Works Foot bridges 8,194,568 8,194,568 Roads Bridges 22,000,000 226,604,131 Road Design and survey works 4,000,000 mechanical development services 60,000,000 Road Works 80,604,131 Ward Roads 60,000,000 36 Department Proposed Programmes Sub - Programmes Sub-Programme Programme Department Allocation Total Ceilings 2015/16 Youth, Sports, 105,952,151 General administration General administration and support Culture, Gender and support services services Sports development Sports Infrastructure Development 55,040,775 60,040,775 Sports Support and talent development 5,000,000 Culture and heritage Culture and Heritage 5,122,308 5,122,308 Gender and social Gender Empowerment and Social 5,444,534 30,344,534 Development development Social Protection 24,900,000 Youth Development Youth Empowerment Services 5,444,534 10,444,534 Programs Youth Enterprise and skill Development 5,000,000 Education and 111,713,478 General Administration General administration & support services Technical & Support Services Training Research, Documentation & Exam Services County Education Board Services ECDE Development ECDE 90,274,074 90,274,074 County Education County Bursary Scheme 0 0 Bursary County Bursary Management services 0 Technical and Technical and Vocational Training 20,007,640 20,007,640 Vocational Training Special Needs Education Special Needs Education 1,431,764 1,431,764 Health Services 143,253,138 Health Administration Health Administrative Services Health Monitoring and Information Management Healthcare Healthcare Infrastructural development 56,428,411 56,428,411 Infrastructural development 37 Department Proposed Programmes Sub - Programmes Sub-Programme Programme Department Allocation Total Ceilings 2015/16 Curative and Nursing and Ambulance Services Rehabilitative Services Pharmacy Services (Medical Supplies) 80,000,000 80,000,000 Clinical Services Preventive and Community Health Services 0 Promotive Services Environmental Health and Sanitation 6,824,727 6,824,727 Maternal Child Health and Nutrition Services Water, 110,460,593 General Administration General administration & support services Environment, & Support Services Lands, Housing, Physical Planning Water Supply Services Water Supply Services 90,446,095 90,446,095 and Natural Resources Land survey 3,493,544 3,493,544 Land survey and Physical Planning 6,281,922 6,281,922 Physical planning Environmental Environmental protection and 3,039,383 3,039,383 protection and conservation conservation Housing Development Housing Development 3,199,649 3,199,649 Town & Urban areas Management of towns & urban Areas 0 Administration Beautification of towns & urban Areas 4,000,000 4,000,000 Trade, Energy, 65,414,064 General Administration General administration & support services Tourism, Co- & Support services operative Tourism Tourism infrastructure development 20,494,350 20,494,350 Development Tourism Marketing and Promotion 0 Trade Trade development 16,058,995 16,058,995 Cooperatives Agricultural Marketing Services and Value 6,022,123 16,463,544 Development addition 38 Department Proposed Programmes Sub - Programmes Sub-Programme Programme Department Allocation Total Ceilings 2015/16 Cooperatives & SACCOs credit facility 10,441,421 support Energy Development Renewable Energy Investments 5,397,175 5,397,175 Industrialization SMEs Development and promotion 7,000,000 7,000,000 Agriculture 142,887,736 General General administration& support services Administration& Support Services Crop Production Horticultural sector support 5,336,286 78,218,160 Agricultural shows & trade exhibitions 5,000,000 Cash crop development & promotion 40,000,000 Research and Extension Services 7,328,065 Farmers Loans Services 20,553,809 Irrigation Irrigation development 25,000,000 25,000,000 Fisheries Production Fisheries Development Services 2,785,127 2,785,127 Livestock Development Livestock Multiplication Services 3,140,508 14,309,976 Dairy Sector Improvement 3,785,127 Livestock Marketing Infrastructure 7,384,341 Development Animal Breeding Services 9,776,904 22,574,473 Veterinary Disease Surveillance and Control 12,797,569 ICT & Public 59,000,000 General administration General Administration and Support Service and support services Services ICT Infrastructure and ICT Infrastructure and Services 25,000,000 39,000,000 Services Communication Services 14,000,000 39 Department Proposed Programmes Sub - Programmes Sub-Programme Programme Department Allocation Total Ceilings 2015/16 Human Resource Human Resources Training and Development Performance Management Services County Administrative Sub-Counties and Ward Administration Units Services Infrastructural Development (ward 20,000,000 20,000,000 offices) County Public 2500000 General administration General Administration and Support Service Board and support services Services Personnel Services Infrastructural Infrastructural Development 2,500,000 2,500,000 Development Grand Totals 1,088,979,859 0 0 1,088,979,859 1,088,979,859 40