REPUBLIC OF KENYA COUNTY GOVERNMENT OF KERICHO FINANCE AND ECONOMIC PLANNING MEDIUM TERM COUNTY FISCAL STRATEGY PAPER 2024 FEBRUARY 2024 1 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 Vision “A prosperous county where residents enjoy a high quality of life in a sustainable environment’’ Mission “To foster equitable and sustained socio-economic development through effective and efficient mobilization and utilization of available resources. CORE VALUES Accountability and Professionalism Accountability to its citizens by paying attention to details and running the affairs of the county in a fair manner. Yield and Sustainability Yielding lasting fruits to be enjoyed by the citizens, putting in place measures to ensure sustainability of programs and services rendered. Commitment and Hard work Commitment to work by ensuring that there is always competitive and efficient service delivery, responsive to the needs of the people. Innovation and Creativity Innovation services driven by creative strategies. TAGLINE All You Can Imagine © County Fiscal Strategy Paper (CFSP) 2024 Office of the Governor County Government of Kericho P.O. Box 112- 20200 Kericho Email: info@kericho.go.ke The document is also available on the internet at: www.kericho.go.ke 2 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 Contents Foreword ............................................................................................... 5 Acknowledgement.................................................................................. 6 CHAPTER ONE ....................................................................................... 7 1.0 COUNTY FISCAL STRATEGY PAPER PROCESS OVERVIEW ............... 7 1.1 Introduction ........................................................................................................................ 7 1.2 County Fiscal Strategy Paper Process ........................................................................ 7 1.3 Legal basis for the publication of County Fiscal Strategy Paper ....................... 7 1.4 Rationale for the Fiscal Strategy Paper .......................................................................... 8 1.5 Outline of the 2024 County Fiscal Strategy Paper ..................................................... 9 CHAPTER TWO .................................................................................... 10 2.0 RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK ................... 10 2.1 Introduction ........................................................................................................................... 10 1.2 Global Economic and Fiscal Overview ..................................................................... 10 1.3 National Economic and Fiscal Overview. ................................................................ 12 1.4 County Economic and Fiscal Overview, FY 2022/2023 ..................................... 14 CHAPTER THREE ................................................................................ 26 3.1 Overview........................................................................................ 26 3.2 County Strategic Objectives ........................................................... 26 3.2.1 Agriculture and Livestock ........................................................... 26 3.2.2 Health and Sanitation ................................................................. 27 3.2.3 Education, Social Protection, Culture and Recreation ................. 28 3.2.6 Lands, Housing and Physical Planning ........................................ 31 3.2.8 Finance, Administration, and Intergovernmental Relations......... 32 CHAPTER FOUR................................................................................... 34 4.1 Overview........................................................................................ 34 4.2 Strategic Priorities and Interventions ............................................ 34 4.3 Fiscal Responsibility Principles for the County Government .......... 34 4.4 Fiscal Policy Framework ................................................................ 35 4.5 Debt Management Strategy .............................................................................................. 35 4.6 FY 2024/25 Budget Framework ..................................................... 36 4.7 Revenues projections .......................................................................................................... 36 4.8 Resource Envelope and Allocation Criteria ..................................... 38 4.9 Expenditure Forecast ..................................................................................................... 38 8.0 CONCLUSION ................................................................................. 42 3 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 ABBREVIATIONS AND ACRONYMS ADP - Annual Development Plan CFSP - County Fiscal Strategy Paper CIDP - County Integrated Development Plan CRA - Commission on Revenue Allocation CSP - County Strategic Plan ECDE - Early Childhood Development Education ERP - Enterprise Resource Planning FIF - Facility Improvement Fund FY - Financial Year HDU - High Dependency Unit ICU - Intensive Care Unit ICT - Information Communication Technology IFMIS - Integrated Financial Management Information System MTEF - Medium Term Expenditure Framework MTP - Medium Term Plan NHIF - National Hospital Insurance Fund NSSF - National Social Security Fund O&M - Operation and Maintenance PFM A - Public Finance Management Act, 2012 PBB - Program Based Budgets 4 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 Foreword The 2024 County Fiscal Strategy Paper (CFSP) has been prepared in line with Section 117 (1) and (6) of the Public Finance Management Act, 2012 and PFM Regulations, 2015. The County Fiscal Strategy Paper (CFSP) underpins the county fiscal and budget framework by laying out strategic priorities and fiscal policy – that is what the county plans to do regarding revenue, expenditure and debt management over the medium-term. Importantly, this document sets the sector and program resource ceilings that guide the FY 2024/2025 budget estimates. The CFSP outlines the Medium-Term Fiscal Framework, which offers mechanisms for entrenching sustainable growth and development for efficient service delivery. The County has continued to record positive economic development. To keep this development pace, the focus of FY 2024/2025 will be geared towards completing developing projects initiated in the previous periods and putting the County Government on stable fiscal ground. Over the years, we have learnt the importance of laying firm fiscal base for the County Government through minimization of debt and maximization of revenues. This is what we intend to achieve with the CFSP and the budget estimates to be drawn from the strategy paper. The fiscal framework presented in the paper ensures a sustainable financing while allowing continued spending on priority programmes. Achievement of the set objectives calls for greater transparency, effectiveness and efficiency in public financial management in order to ensure fiscal discipline. Hon. Leonard K. Ngetich CECM Finance and Economic Planning and Head of County Treasury. 5 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 Acknowledgement The County Fiscal Strategy Paper (CFSP) is envisaged to play critical role in influencing the pace at which the County’s economy will grow. It provides a framework under which the County will deal with the key strategic priority issues and challenges in the next three years and beyond. It also outlines a summary of government spending plans as a basis for the 2024/25 budget. I am grateful to the County Secretary and all Chief Officers for the valuable information they provided in their respective fields and for the cooperation shown during the period of the assignment. I also take this opportunity to express my profound gratitude to members of the County Executive Committee and especially His Excellency the Governor for the visionary leadership that has enabled us to chart a clear development path. It is through his exemplary guidance, support, and mentorship that the County Treasury has continued to produce and implement prudent policies, excellent plans and budget documents that have helped steer the County to great success on financial and budgetary matters. Finally, special thanks go to CPA. Ian Rotich, Deputy Director Budget, and his team; CPA. Kenneth Ouma, CPA. Lawrence Koech, Mrs. Nancy Rop, and all County Treasury Staff for their commitment and hard work in ensuring this policy paper is prepared. Alphonce Rotich Chief Officer-Economic Planning 6 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 CHAPTER ONE 1.0 COUNTY FISCAL STRATEGY PAPER PROCESS OVERVIEW 1.1 Introduction 1. This Kericho County Fiscal Strategy Paper 2024 is prepared in line with the Constitution, the Public Financial Management (PFM) Act, 2012. It will guide the County Government in preparing its budget for Financial Year (FY) 2024/2025 and the Medium Term. 1.2 County Fiscal Strategy Paper Process 2. As per the requirement of the Public Finance Management Act, 2012 section 117(5) the County Government has taken into consideration views of various stakeholders during the preparation of the 2024 County Fiscal Strategy Paper. 1.3 Legal basis for the publication of County Fiscal Strategy Paper The County Fiscal Strategy Paper is published in accordance with section 117 of the Public Finance and Management Act, 2012. The law states 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. (5) In preparing the County Fiscal Strategy Paper, the County Treasury shall seek and take into account the views of— (a) the Commission on Revenue Allocation; (b) the public; 7 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 (c) any interested persons or groups; and (d) any other forum that is established by legislation. (6) Not later than fourteen days after submitting the County Fiscal Strategy Paper to the county assembly, the county assembly shall consider and may adopt it with or without amendments. (7) The County Treasury shall consider any recommendations made by the county assembly when finalising the budget proposal for the financial year concerned. (8) The County Treasury shall publish and publicise the County Fiscal Strategy Paper within seven days after it has been submitted to the county assembly. 1.4 Rationale for the Fiscal Strategy Paper 3. The objective of the 2024 County Fiscal Strategy Paper is to lay down the framework for the preparation of the County Budget. It is a requirement under Section 117 of the Public Finance Management Act, 2012 that each County Treasury shall prepare and submit to the County Executive Committee the Fiscal Strategy Paper for approval, and the County Treasury shall submit the approved Fiscal Strategy Paper to the County Assembly by the 28th February each year. Pursuant to the provisions of the PFM Act 2012, this County Fiscal Strategy Paper addresses the following: i. The Medium-Term macroeconomic framework and its outlook as contained in the Budget Policy Statement and how it impacts on the County economic environment; ii. A statement of fiscal responsibility principles, as specified in the PFM Act, 2012 and regulations indicating how the Fiscal Strategy Paper adheres to these principles; iii. The economic assumptions underlying the County budgetary and fiscal policy over the Medium Term; 8 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 iv. Indicative allocation of available resources among County Government entities; and v. A medium-term fiscal framework defining a top-down aggregate resource envelope and broad expenditure levels. 1.5 Outline of the 2024 County Fiscal Strategy Paper 4. The report is structured into four sections as follows; a) Chapter One provides an overview of the report b) Chapter Two outlines the recent economic development and fiscal outlook at the Global, National and County Levels. c) Chapter Three outlines the County strategic objectives and the various programmes that the County is implementing to achieve her objectives. d) Chapter Four covers the fiscal and budget framework with projected resource envelope and departmental ceilings. 9 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 CHAPTER TWO 2.0 RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK 2.1 Introduction 5. This section gives an overview of the recent economic developments at the global, national, and county levels. 1.2 Global Economic and Fiscal Overview 6. Global growth is set to slow further this year amid tight monetary policy, restrictive financial conditions, and feeble global trade and investment. Downside risks include an escalation of the recent conflict in the Middle East, financial stress, persistent inflation, trade fragmentation, and climate-related disasters. Global cooperation is needed to provide debt relief, facilitate trade integration, tackle climate change, and alleviate food insecurity. Among emerging market and developing economies (EMDEs), commodity exporters continue to grapple with fiscal policy procyclicality and volatility. Across all EMDEs, proper macroeconomic and structural policies, and well-functioning institutions, are critical to help boost investment and long-term prospects. 7. Global growth is expected to slow to 2.4 percent in 2024 the third consecutive year of deceleration reflecting the lagged and ongoing effects of tight monetary policies to rein in decades-high inflation, restrictive credit conditions, and anemic global trade and investment. Near-term prospects are diverging, with subdued growth in major economies alongside improving conditions in emerging market and developing economies (EMDEs) with solid fundamentals. Meanwhile, the outlook for EMDEs with pronounced vulnerabilities remains precarious amid elevated debt and financing costs. Downside risks to the outlook predominate. The recent conflict in the Middle East, coming on top of the Russian Federation’s invasion of Ukraine, has heightened geopolitical risks. Conflict escalation could lead to surging energy prices, with broader implications for global activity and inflation. Other risks include financial stress related to elevated real interest rates, persistent 10 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 inflation, weaker-than-expected growth in China, further trade fragmentation, and climate change-related disasters. 8. While much attention has been paid to the transport crisis in the Red Sea and the resulting increase in shipping costs, another crisis is taking place on the other side of the world. A severe drought has plagued the Panama Canal. This has resulted in restrictions on the number and size of ships that can pass through the canal. The Panama Canal Authority has raised tolls to manage the shortage of capacity. The result has been a sharp rise in the cost of shipping goods from Asia to the East Coast and Southern Coast of the United States. The cost of shipping a container from Japan to Houston, for example, is up about 150% since mid-2022. 9. Blame for the drought has been placed on climate change as well as on the El Nino season. However, a new study suggests that it also has much to do with the deforestation of the Amazon basin. That is, the canal is highly dependent on rainfall, which maintains water levels in lakes that supply water to the canal. In recent years, due to deforestation in the Amazon, rainfall levels have been historically low. The result is that the water levels in the lakes adjacent to the canal have fallen to record lows. 10. Global growth is projected at 3.1 percent in 2024 and 3.2 percent in 2025, with the 2024 forecast 0.2 percentage point higher than that in the October 2023 World Economic Outlook (WEO) on account of greater-than- expected resilience in the United States and several large emerging market and developing economies, as well as fiscal support in China. The forecast for 2024–25 is, however, below the historical (2000–19) average of 3.8 percent, with elevated central bank policy rates to fight inflation, a withdrawal of fiscal support amid high debt weighing on economic activity, and low underlying productivity growth. Inflation is falling faster than expected in most regions, in the midst of unwinding supply-side issues and restrictive monetary policy. Global headline inflation is expected to fall to 5.8 percent in 2024 and to 4.4 percent in 2025, with the 2025 forecast revised down. 11 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 11. With disinflation and steady growth, the likelihood of a hard landing has receded, and risks to global growth are broadly balanced. On the upside, faster disinflation could lead to further easing of financial conditions. Looser fiscal policy than necessary and then assumed in the projections could imply temporarily higher growth, but at the risk of a more costly adjustment later on. Stronger structural reform momentum could bolster productivity with positive cross-border spillovers. On the downside, new commodity price spikes from geopolitical shocks––including continued attacks in the Red Sea––and supply disruptions or more persistent underlying inflation could prolong tight monetary conditions. Deepening property sector woes in China or, elsewhere, a disruptive turn to tax hikes and spending cuts could also cause growth disappointments. 12. Policymakers’ near-term challenge is to successfully manage the final descent of inflation to target, calibrating monetary policy in response to underlying inflation dynamics and—where wage and price pressures are clearly dissipating—adjusting to a less restrictive stance. At the same time, in many cases, with inflation declining and economies better able to absorb effects of fiscal tightening, a renewed focus on fiscal consolidation to rebuild budgetary capacity to deal with future shocks, raise revenue for new spending priorities, and curb the rise of public debt is needed. Targeted and carefully sequenced structural reforms would reinforce productivity growth and debt sustainability and accelerate convergence toward higher income levels. More efficient multilateral coordination is needed for, among other things, debt resolution, to avoid debt distress and create space for necessary investments, as well as to mitigate the effects of climate change. 1.3 National Economic and Fiscal Overview. 13. The country has made significant political and economic reforms that have contributed to sustained economic growth, social development, and political stability gains over the past decade. However, its key development 12 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 challenges still include poverty, inequality, youth unemployment, transparency and accountability, climate change, continued weak private sector investment, and the vulnerability of the economy to internal and external shocks. 14. Kenya's economy remained strong and resilient in the first three quarters of 2023 and grew by an average of 5.6 percent (5.5 percent in Q1 and Q2 and 5.9 percent Q3). The growth was primarily underpinned by a rebound in agriculture activities and a continued resilience of the service sector. In addition, all economic sectors recorded positive growth rates in the first three quarters of 2023, though the magnitudes varied across activities. 15. Year-on-year overall inflation has remained within the Government target range of 5±2.5 percent in the first half of FY 2023/24. Inflation declined to 6.6 percent in December, 2023 from 9.1 percent in December, 2022 largely driven by the easing of food prices and the impact of monetary policy tightening. Short-term interest rates increased in December, 2023 in line with the tight monetary policy stance. The interbank rate increased to 11.7 percent in December 2023 compared to 5.4 percent in December, 2022 while the 91-day Treasury Bills rate increased to 15.8 percent compared to 9.3 percent over the same period. Consequently, the liquidity conditions in the money market also increased thereby reflecting the cost of investable funds. The average lending rate increased to 14.6 percent in December, 2023 from 12.7 percent in December, 2022 while the average deposit rate increased to 10.1 percent from 7.2 percent over the same period. 16. The Government has implemented bold policy responses to mitigate the negative global and persistent shocks that have pushed the economy to its lowest vibrant level, and embarked on structural reforms to stabilize Government finances and the economy. These shocks include, global supply chain disruptions due to ongoing conflicts in Eastern Europe and the Israeli- Palestinian war; high interest rates limiting access to credit and exacerbating debt servicing costs; significant losses and damages due to frequent extreme 13 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 weather events; and elevated commodity prices such on petroleum products on account of increased geopolitical fragmentation and global oil supply cuts. 17. Against this background, the Government continues to implement interventions and policies to reduce the cost of living and improving livelihoods, while at the same time fostering a sustainable inclusive economic transformation through the Bottom-Up Economic Transformation Agenda. This is meant to reverse the economic recession and ignite economic recovery. This Development Agenda recognizes the importance of managing the cost of living through well-functioning markets to enhance productivity, availability and affordability of goods and services for all citizens. Indeed, market failures in sectors that supported the economy are glaring. The interventions target five core priority areas namely: i) Agricultural Transformation and Inclusive Growth; ii) Micro, Small and Medium Enterprise (MSME) Economy; iii) Housing and Settlement; iv) Healthcare; and v) Digital Superhighway and Creative Industry. 1.4 County Economic and Fiscal Overview, FY 2022/2023 18. The County’s approved final Supplementary Budget for FY 2022/23 was Kshs.8.453 billion, comprising of Kshs.5.825 billion (69 per cent) and Kshs.2.628 billion (31 per cent) allocation for development and recurrent programmes respectively. 19. To finance the budget, the County expected to receive Kshs.6.43 billion (76 per cent) as equitable share of revenue raised nationally, Kshs.8.9 million (0.11 per cent) as total conditional grants, Kshs 479.4 million (5.67 per cent) as donor funds, generate Kshs.1.019 million (12.06 per cent) from own sources of revenue and had Kshs. 515.1 million (6.09 per cent) as cash balance from FY 2021/22. 14 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 Table 1: Summary of Final 2 Supplementary Budget FY 2022/23 Line Ministries/Departments RECURRENT DEVELOPMENT TOTAL SUPPL 2 % SUPPL 2 SUPPL 2 1 County Assembly Services 933,813,928 45,673,899 979,487,827 12% 2 Public Service & Administration 424,870,257 5,950,340 430,820,597 5% 3 Office of the Governor & Deputy governor 166,179,145 - 166,179,145 2% 4 County Public Service Board 57,471,889 - 57,471,889 1% 5 Finance & Economic Planning 451,244,683 565,848,203 1,017,092,886 12% 6 Health Services 2,628,069,196 421,551,852 3,049,621,048 36% 7 Agriculture, Livestock Development & Fisheries 177,040,742 365,575,812 542,616,554 6% 8 Education, Youth Affairs, Culture & Social Services 532,762,085 140,670,280 673,432,365 8% 9 Public Works, Roads & Transport 82,915,604 564,869,856 647,785,460 8% 10 Trade, Industrialization, Tourism, Wildlife & 61,029,360 3,120,186 64,149,546 1% Cooperative Development 11 Water, Energy, Natural Resources & Environment 154,934,193 363,492,253 518,426,446 6% 12 Land, Housing & Physical Planning 99,122,639 96,434,313 195,556,952 2% 13 Information, Communication & E-Government 55,833,107 36,361,897 92,195,004 1% 14 STRATEGIC INTERVENTION 18,737,382 18,737,382 0% TOTAL EXPENDITURE 5,825,286,828 2,628,286,272 8,453,573,101 100% Table 2: Shows the expected sources of budget financing in the FY 2022/23 FINANCIAL YEAR 2022/23 Supplementary II Revenue Description 1.CRA Equitable share 6,430,664,924 2.Local Collections 385,071,600 3.Facility Improvement Fund & NHIF Rebates 634,316,453 4.CONDITIONAL GRANTS - 4A. Routine Maintenance Fuel Levy 8,916,435 5. DONOR FUNDS - 5A. DANIDA FUND 9,180,000 5B. Agricultural Sector development support Fund (ASDSP II) 43,114,132 5C. Transformative health system (world bank) 75,443,658 5D. Kenya Devolution Support Project (world bank) 102,491,953 5E. Climate Smart Agriculture Project (world bank) 149,190,522 5F. Kenya Urban Support Program UDG (SIDA) 1,194,559 5F. Kenya Urban Support Program UIG (SIDA) 1,145,356 5G. Climate Change Institutional Support (World bank) 22,000,000 5H. IDA National Agricultural Value Chain Devt Project (NAVCDP 70,000,000 Insurance compensation 5,678,000 UNSPENT FUND 515,165,509 Gross Total 8,453,573,101 15 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 20. During FY 2022/23, the County received Kshs. 6.430 billion as equitable share of revenue raised nationally, Kshs. 8.9 million as total conditional grants, Kshs 410.8 million as donor funds, insurance compensation of Kshs 5.678 million and had a cash balance of Kshs.515 million from FY 2021/22. The County also raised Kshs.501.3 million from its own source revenue. Table 3: Analysis of Exchequer Releases per Quarter Kshs Total Exchequer Releases for quarter 1 1,061,059,713 Total Exchequer Releases for quarter 2 1,061,059,712 Total Exchequer Releases for quarter 3 1,061,059,712 Total Exchequer Releases for quarter 4 3,247,485,787 Total 6,430,664,924 16 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 Table 4: Analysis Own Source Revenue by Streams Revenue Stream ANNUAL 2022/2023 2022/2023 Q2 2022/2023 2022/2023 YTD ACTUAL VARIANCE PROJECTION Q1 ACTUAL ACTUAL Q3 ACTUAL Q4 ACTUAL FY 2022-23 Hospital Payments 528,196,453 46,530,875 35,610,973 58,201,020 80,804,702 221,147,570 (307,048,883) Bus Park Fees 25,000,000 3,158,922 3,695,990 4,422,070 4,103,430 15,380,412 (9,619,588) Market Fees 30,000,000 3,348,240 4,218,930 4,193,170 4,324,085 16,084,425 (13,915,575) Car Park Fees 15,000,000 2,894,650 2,898,850 2,561,700 3,049,500 11,404,700 (3,595,300) Single Business Permit 65,000,000 1,981,500 2,329,000 37,553,000 19,239,100 61,102,600 (3,897,400) Advertisement, Branding and 10,000,000 3,967,100 1,143,899 6,150,440 3,141,024 14,402,463 4,402,463 Billboard Fees Land and Property Rates Fees 90,000,000 2,642,859 2,524,169 985,045 45,900 6,197,973 (83,802,027) Public Health Payments 5,000,000 1,207,600 877,900 1,193,100 750,700 4,029,300 (970,700) House Rent Fees 10,000,000 1,622,350 5,837,900 -2,424,400 2,199,079 7,234,929 (2,765,071) Building Plan Approvals Fees 10,000,000 731,220 1,173,090 3,246,775 2,179,035 7,330,120 (2,669,880) Weights and Measures Fees 5,000,000 203,740 1,093,810 685,030 229,230 2,211,810 (2,788,190) Quarry Stone Cess 3,000,000 481,400 449,700 655,300 778,300 2,364,700 (635,300) Agriculture Livestock , Veterinary 2,500,000 528,330 621,645 584,585 368,115 2,102,675 (397,325) Payments and Machinery Services. Signages Fees 6,000,000 77,900 181,500 3,459,600 1,070,700 4,789,700 (1,210,300) Slaughterhouse Operation Fees 1,500,000 291,500 304,940 315,900 257,260 1,169,600 (330,400) Stockyard Sales Fees 2,000,000 414,420 494,380 438,220 380,760 1,727,780 (272,220) Boda Boda Payments 5,000,000 2,100 1,500 28,200 13,000 44,800 (4,955,200) Reserved Parking Fees 2,000,000 - 832,000 2,198,400 403,500 3,433,900 1,433,900 Refuse Fees 8,000,000 146,400 168,800 4,340,200 1,812,600 6,468,000 (1,532,000) Plot Rent 2,000,000 139,913 946,793 1,089,776 241,566 2,418,048 418,048 Produce Cess 2,500,000 1,232,834 4,057,887 -3,811,460 1,562,467 3,041,728 541,728 Nema Fees, Drilling Services 250,000 400,000 140,000 353,500 85,000 978,500 728,500 Fire License Fees 6,000,000 202,300 165,400 2,708,700 1,057,100 4,133,500 (1,866,500) Survey Fees 700,000 101,000 133,000 152,800 85,000 471,800 (228,200) Murram, Ballast , Sand & Scrap 1,000,000 57,700 199,700 213,600 451,900 922,900 (77,100) Metal Cess Fees Inspection Fees 2,500,000 95,000 72,100 1,321,700 800,700 2,289,500 (210,500) Application/Registration Fees 2,500,000 80,200 43,000 828,200 770,500 1,721,900 (778,100) Forest Cess/Seedling Sale Yard 500,000 58,800 41,200 59,300 343,400 502,700 2,700 Clamping, Fines and Impounding 300,000 21,800 123,100 81,450 105,650 332,000 32,000 17 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 Revenue Stream ANNUAL 2022/2023 2022/2023 Q2 2022/2023 2022/2023 YTD ACTUAL VARIANCE PROJECTION Q1 ACTUAL ACTUAL Q3 ACTUAL Q4 ACTUAL FY 2022-23 Fees Business Permits Late Payment 500,000 29,750 4,631 7,100 459,621 501,102 1,102 Penalties, Current Year Tea Transport Cess fees 100,000 - - 73,500 0 73,500 (26,500) Audit Fees 50,000 3,000 3,000 12,000 27,000 45,000 (5,000) Cemetery Fees 15,000 2,000 2,000 5,000 2,500 11,500 (3,500) Hire Of Social Hall/Park & Stadium 450,000 221,000 31,500 21,500 20,000 294,000 (156,000) Fees Alcoholic Drink License Fees 5,000,000 - - 3,000,000 2,000,000 5,000,000 - Coffee Fees 750,000 1,000 - 0 0 1,000 (749,000) Land Cultivation Fees 500,000 - - 15,883,692 66,926,718 82,810,410 82,310,410 Kabianga Tea Farm Payments 5,000,000 300,000 - 600,000 600,000 1,500,000 (3,500,000) Insurance Compensation 0 5,678,000 - 0 - 5,678,000 5,678,000 TOTAL REVENUE STREAMS 853,811,453 78,855,403 70,422,287 151,387,713 200,689,142 501,354,545 (352,456,908) 18 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 Table 5: Analysis of Receipt from Conditional Grants CONDITIONAL GRANTS Routine Maintenance Fuel Levy 8,916,435 Total Conditional Grants 8,916,435 Table 6: Analysis of Donor Funds Receipts. DONOR FUNDS DANIDA FUND 5,960,625 Agricultural Sector development support Fund (ASDSP) 9,250,013 Transformative health system (world bank) 75,443,658 Kenya Devolution Support Project (world bank) 102,491,953 Climate Smart Agriculture Project (world bank) 126,184,585 Kenya Urban Support Program UDG (WORLD BANK) 1,194,559 Kenya Urban Support Program UIG (WORLD BANK) 1,145,356 Climate Change Institutional Support (World bank) 22,000,000 National Agricultural Value Chain Devt Project (NAVCDP) 67,192,729 410,863,478 21. In overall, actual income received by the County Treasury reflected a deficit of Kshs 1.17 billion attributable to delayed releases by both the exchequer and the Donors Funds. Own source revenue target was not achieved by Kshs 275.8 million including the FIF and NHIF rebates. Revenue performance-July-December 2023 22. Over the 6-months period, the major source of revenue was Kshs 2,781,798,920 from the Equitable. Own Source Revenue contributed Kshs 179,567,500 while the unspent balance from the previous financial year was Kshs 15,376,949.10. Donor funding relating to ASDSP II amounted to Kshs. 500,000. MONTH EQUITABLE OWN SOURCE UNSPENT DONOR FUNDS TOTAL SHARE REVENUE BALANCE JULY 569,766,044.00 28,400,000.00 15,376,949.10 500,000.00 614,042,993.1 AUGUST - 30,057,200.00 - 30,057,200 SEPTEMBER 1,106,016,438.00 25,960,300.00 - 1,131,976,738 OCTOBER - 37,934,500.00 - 37,934,500 NOVEMBER 536,250,394.00 34,868,500.00 - 571,118,894 DECEMBER 569,766,044.00 22,347,000.00 - 592,113,044 TOTAL 2,781,798,920.00 179,567,500.00 15,376,949.10 500,000.00 2,977,243,369.1 Own Source Revenue Collection July-December 2023 23. The analysis of revenues collected from County’s local sources is as indicated in the table below from July to December 2023 19 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 OWN SOURCE REVENUE FOR THE PERIOD JUL - DEC 2023 REVENUE STREAM ANNUAL 2023/2024 Q1 2023/2024 YTD ACTUAL VARIANCE PROJECTION FY ACTUAL Q2 ACTUAL 2023-24 1 Hospital Payments 743,350,000 34,167,418 54,983,108 89,150,526 (654,199,474) 2 Market Fees 30,000,000 4,656,920 4,656,920 9,313,840 (20,686,160) 3 Land and Property Rates Fees 210,071,600 4,596,036 4,596,036 9,192,072 (200,879,529) 4 Bus Park Fees 25,000,000 4,113,310 4,113,310 8,226,620 (16,773,380) 5 Car Park Fees 15,000,000 3,911,700 3,911,700 7,823,400 (7,176,600) 6 Single Business Permit 100,000,000 3,905,200 12,052,910 15,958,110 (84,041,890) 7 House Rent Fees 15,000,000 2,122,423 2,122,423 4,244,846 (10,755,154) 8 Building Plan Approvals Fees 15,000,000 1,415,050 1,415,050 2,830,100 (12,169,900) 9 Forest Cess/Seedling Sale Yard 1,000,000 1,291,600 1,291,600 2,583,200 1,583,200 10 Quarry Stone Cess 5,000,000 864,300 864,300 1,728,600 (3,271,400) 11 Weights and Measures Fees 5,000,000 637,600 637,600 1,275,200 (3,724,800) 12 Advertisment,Branding and Billboard Fees 20,000,000 571,635 571,635 1,143,270 (18,856,730) 13 Stockyard Sales Fees 2,000,000 422,260 422,260 844,520 (1,155,480) 14 Kabianga Tea Farm Payments 5,000,000 400,000 400,000 800,000 (4,200,000) 15 Agriculture Livestock , Veterinary Payments 5,000,000 345,970 345,970 691,940 (4,308,060) and Machinery Services. 16 Produce Cess 5,000,000 339,380 339,380 678,760 (4,321,240) 17 Murram, Ballast , Sand & Scrap Metal Cess 3,000,000 310,500 310,500 621,000 (2,379,000) Fees 18 Slaughter House Operation Fees 2,000,000 307,600 307,600 615,200 (1,384,800) 19 Plot Rent 3,000,000 307,496 307,496 614,992 (2,385,008) 20 Refuse Fees 10,000,000 235,000 235,000 470,000 (9,530,000) 21 Inspection Fees 5,000,000 165,600 165,600 331,200 (4,668,800) 22 Signages Fees 10,000,000 160,000 160,000 320,000 (9,680,000) 23 Application/Registration Fees 5,000,000 150,800 150,800 301,600 (4,698,400) 24 Public Health Payments 5,000,000 126,500 126,500 253,000 (4,747,000) 25 Fire License Fees 8,000,000 122,000 122,000 244,000 (7,756,000) 26 Clamping, Fines and Impounding Fees 500,000 120,450 120,450 240,900 (259,100) 27 Nema Fees,Drilling Services 500,000 113,000 113,000 226,000 (274,000) 28 Survey Fees 1,000,000 103,000 103,000 206,000 (794,000) 29 Education Payment Fees 500,000 87,570 87,570 175,140 (324,860) 30 Business Permits Late Payment Penalties, 1,000,000 76,832 76,832 153,664 (846,336) Current Year 31 Hire Of Social Hall/Park & Stadium Fees 500,000 25,000 25,000 50,000 (450,000) 20 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 32 Reserved Parking Fees 3,000,000 6,500 6,500 13,000 (2,987,000) 33 Cemetery Fees 50,000 4,750 4,750 9,500 (40,500) 34 Boda Boda Payments 5,000,000 3,200 3,200 6,400 (4,993,600) 35 Alcoholic Drink License Fees 7,500,000 - - - (7,500,000) 36 Audit Fees 100,000 - - - (100,000) 37 Land Cultivation Fees 1,000,000 22,728.00 - 22,728.00 (977,272) 38 Tea Transport Cess fees 350,000 - - - (350,000) TOTAL REVENUE STREAMS 1,273,421,600 66,209,328 95,150,000 161,359,328 (1,112,062,273) 21 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 24. From this analysis, in the first half-year, the County has generated 13% of its Own Source Revenue (Local Collections, NHIF rebates and FIF) target of Kshs. 1,273,421,600. Hospital payments was the best performing revenue stream in the period. The stream generated 55% (Kshs. 89,150,526) of the County’s Own Source Revenue within the 6-month period. This was followed by Single Business Permit, Market fees, Land and Property Rates Fees and Bus Park Fees. County 2023/24 First Half-year expenditure performance 25. The total expenditure for the first half of the FY 2023/24 is Kshs 1,909 million which comprised of recurrent and development expenditure. 26. The table below shows the expenditures per department and by programme and sub programme. 22 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 DEPARTMENT: EXECUTIVE OFFICE OF THE GOVERNOR Programme Sub-Programme Approved Original Estimates FY 2023/24 (Kshs.) Actual Expenditure Jul - Dec 23 Absorption Rate (Kshs.) Recurrent Development Gross Recurrent Development Recur Dev Expenditure Expenditure Expenditure Expenditure County Coordination County Coordination Services 137,051,145 - - 44% Services 137,051,145 60,213,075 137,051,145 - 137,051,145 60,213,075 - 44% DEPARTMENT: FINANCE AND ECONOMIC PLANNING Administration, Administration Services. 231,136,530 57,339,884 38% 68% Planning and 83,735,659 314,872,189 87,724,527 Support Services. Administration, Monitoring Budget 28,687,985 - 26% 0% Planning and Implementation and 6,379,644 35,067,629 7,486,680 Support Services. Reporting Public Finance Budget Formulation co- 8,400,000 - 23% 0% Management odination and management 553,360,903 561,760,903 1,973,600 Audit Services County Audit 4,975,639 - 23% 3,000,000 7,975,639 1,158,200 273,200,154 646,476,206 919,676,360 98,343,007 57,339,884 36% 9% DEPARTMENT: AGRICULTURE, LIVESTOCK AND FISHERIES AND COOPERATIVE MANAGEMENT Policy, Strategy and Development of Agricultural 53,301,163 - 10,000,000 17% Management of Policy, Legal & Regulatory 53,301,163 8,858,545 Agriculture framework. Crop Development Agriculture Extension 58,894,485 - 98% 0% and Management Services 496,837,574 555,732,059 57,460,908 Livestock Resource Livestock Disease 2,024,041 - 27% 0% Management and Management and Control. 21,184,205 23,208,246 554,100 Development Livestock Resource Livestock Production and 51,654,981 - - 1% Management and Extension Services 51,654,981 381,050 Development Fisheries Management and 6,905,001 - 5% 0% development Development of Capture 500,000 7,405,001 324,500 Fisheries 172,779,671 518,521,779 6 91,301,450 6 7,579,102 10,000,000 39% 2% DEPARTMENT: WATER, ENERGY, NATURAL RESOURCES AND ENVIRONMENT Environment policy Planning Coordination Policy 144,072,462 - 42% 0% development and and Administrative Services 63,145,000 207,217,462 60,487,245 coordination Water supply Rural Water Supply 14,365,228 13,899,863 9% 6% services 218,860,274 233,225,502 1,337,500 158,437,690 282,005,274 440,442,964 61,824,745 13,899,863 39% 5% 23 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 DEPARTMENT:EDUCATION, YOUTH AFFAIRS, CULTURE AND SOCIAL SERVICES General Policy Development and 549,596,382 29% Administration & Administration 10,000,000 559,596,382 160,944,293 planning services. Basic Education Early Childhood 216,382,852 28,357,815 0% 32% Development Education 89,573,270 305,956,122 750,000 Gender and Social Social Welfare 3,000,000 - 33% 0% Development Services/Social Infrastructure 17,035,537 20,035,537 1,000,000 Development Youth development Youth development (YP) - - 0% and empowerment Training 57,000,000 57,000,000 - services 768,979,234 1 73,608,807 9 42,588,041 1 62,694,293 28,357,815 21% 16% DEPARTMENT: HEALTH SERVICES Curative Health Administration and Planning 1,581,600,049 - 45% 0% 142,141,193 1,723,741,242 719,001,777 Curative Health Hospital(curative)Services - - - - - Preventive and Preventive Medicine and 1,170,865,728 - 16% 0% Promotive Health Promotive Health 141,648,789 1,312,514,517 184,130,648 2,752,465,777 2 83,789,982 3 ,036,255,759 903,132,425 - 33% 0% DEPARTMENT: LANDS, HOUSING AND PHYSICAL PLANNING Administration and General Administration and 40,701,923 22,500,000 81% 50% support services Planning 45,000,000 85,701,923 32,887,837 Housing Housing Development 9,243,184 - - 8% 0% Development and 9,243,184 715,800 Human Resource Land policy and Development Planning and 34,395,730 - 24% 0% planning Land Reforms 22,022,942 56,418,672 8,382,574 Land policy and Land Use Planning 6,152,443 - - 2% planning 6,152,443 149,250 90,493,280 6 7,022,942 157,516,222 42,135,462 22,500,000 47% 34% DEPARTMENT: PUBLIC WORKS, ROADS AND TRANSPORT Transport General Administration 73,712,784 - - 60% Management and Planning and Support 73,712,784 44,140,266 safety Services Infrastructure, Roads Rehabilitation of Road 3,400,000 90,696,453 2% 15% and Transport 587,441,016 590,841,016 80,000 Infrastructure, Roads Maintenance of Roads and 21,206,317 - 0% 0% and Transport Bridges/Periodic 3,000,000 24,206,317 - Maintanence 98,319,101 590,441,016 688,760,117 44,220,266 90,696,453 45% 15% 24 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 DEPARTMENT: TRADE, INNOVATION, INDUSTRIALISATION, TOURISM, WILDLIFE Trade development Fair trade Practices and 20,620,890 - 5% 0% and investment Consumer Protection (weight 23,202,942 43,823,832 1,129,447 & measures) Trade development Administrative and Support 37,619,414 - 53% 0% and investment Services. 200,000,000 237,619,414 19,773,808 Cooperative Cooperative Advisory & - - - - 0% 0% development and Extension Services. - management Tourism Local Tourism Development. 5,882,961 - 0% development and 5,000,000 10,882,961 215,400 marketing 64,123,265 2 28,202,942 292,326,207 21,118,655 - 33% 0% DEPARTMENT: ICT AND E-GOVERNMENT Information & News and Information 53,836,604 - - 38% 0% Communication Services 53,836,604 20,370,790 Service Information & ICT and BPO development - - 0% 0% Communication services 40,262,387 40,262,387 - Service Youth development Youth development (YP) - 0% 0% and empowerment Training 3,400,000 3,400,000 - services 53,836,604 43,662,387 97,498,991 20,370,790 - 38% 0% DEPARTMENT: COUNTY PUBLIC SERVICE BOARD Administration of Establishment, Appointment, 71,312,544 - - 38% Human Resources Discipline and Board 71,312,544 27,222,382 and Public Service Management. 71,312,544 - 71,312,544 27,222,382 - 38% DEPARTMENT: PUBLIC SERVICE MANAGEMENT Administration of General Administration, 294,637,612 - 55% 0% Human Resources Planning and Support 28,241,257 322,878,869 161,996,494 and Public Service Services Administration of Human Resource 147,232,645 - - 11% Human Resources Development 147,232,645 16,138,330 and Public Service 441,870,257 28,241,257 470,111,514 178,134,824 - 40% 0% County Executive 5,082,868,722 2,861,972,592 7,944,841,314 1,686,989,026 222,794,015 33% 8% Grand Total 25 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 CHAPTER THREE 3.0 BUDGET THEME: BUDGETING FOR ECONOMIC DEVELOPMENT 3.1 Overview 27. This chapter provides the details for overall spending priorities of the county government. It also describes the sectoral spending priority programmes and projects for the remaining MTEF period. 28. The 2024/2025 Annual Development Plan spells out priority activities, projects and programmes to be undertaken by the various departments during the plan period. This is key in terms of informing allocation of resources to various sectors, projects and programmes. 29. The medium-term budget framework for 2024/25 – 2026/27 has taken into account the need to ensure fiscal consolidation and prioritize resources towards economic recovery. 3.2 County Strategic Objectives 3.2.1 Agriculture and Livestock 30. Agriculture remains a core pillar for the realization of the Bottom Economic Transformation Agenda’s aspiration of proving employment and a means of livelihood to most of the Kenyan people. 31. Over the medium term, the Government will align all policies under the agriculture sector towards increasing food production, boosting smallholder productivity, and reducing the cost of food. Overall, the strategies under the Agricultural Transformation and Inclusive Growth Pillar will be geared towards: addressing the cost, quality and availability of inputs; reducing the cost of food and cost of living in general; reducing the number of food insecure Kenyans; raising productivity of key food value chains; increasing access to affordable credit and agricultural extension services; creating direct and indirect jobs, increasing average daily income of farmers as well as exchange earnings; and revamping underperforming and collapsed export crops while expanding emerging ones. 26 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 32. The County proposes to utilize available land to enhance food security and wealth creation of Kericho citizenry during FY 2024/2025. The sector will continue undertaking the following; provision of efficient and effective agricultural, livestock and fisheries services, improving food security and; promoting affordable agricultural land use and efficiency in farm operations through crop management; the veterinary services will continue preventing and controlling spread of disease from within and other counties; providing animal health and extension and welfare services; Improved livelihood for the households in income generation activities through cooperative marketing and value addition. 3.2.2 Health and Sanitation 33. The Constitution guarantees Kenyans the right to the highest standards of health. For this reason, the Kenya Kwanza Administration identified healthcare delivery as one of the core pillars of the Bottom-Up Economic Transformation Agenda. In order to deliver Universal Health Coverage, the Government embarked on various interventions to: i) provide of a fully public financed primary health care system, an emergency care fund and a health insurance fund that will cover all Kenyans, ii) install of a digital health management information system, iii) set up a Fund for improving health facilities; iv) set up an Emergency Medical Treatment Fund, iv) establish a National Insurance Fund that covers all Kenyans, and v) avail medical staff who would deliver Universal Health Coverage 34. Access to quality and affordable healthcare is critical for socio-economic development. The National and County Governments have their specific functions that are complementary towards achievement of quality, efficient and affordable Universal Health Coverage (UHC) for all Kenyans. The county government is committed to supporting the health sector in terms of adequate 27 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 human resources, health care financing, provision of commodities and developing the required infrastructure. 35. In the forthcoming FY 2024/25, the Department will continue to enhance healthcare access in the County. Community Health Promoters have been recruited and will continue to promote healthy living in our rural communities. 3.2.3 Education, Social Protection, Culture and Recreation 36. This sector is responsible for coordinating preprimary and vocational training, social security services and sports talent and arts. It executes its mandate through the following programs: County Pre-Primary Education, Vocational Education, Youth Training and Development, County Social Security and Services; General Administration, Planning and Support Services. The sector envisions having an educated, socially secure, and empowered citizenry. 37. Education and training is a key enabler of the Government’s Bottom-Up Economic Transformation Agenda for inclusive growth. For this reason, the Government has continued to heavily invest in education to facilitate impartation of the necessary skills and competencies to learners from pre- primary to the tertiary level to enable them effectively play their part by contributing to the nation building effort, and partake of the dividends of shared prosperity. 38. The County government is also committed provide equipment for people living with disabilities (PWDs). The Government has also prioritized human capital development by investing in quality and relevant education including revamping the Vocational Education and Training (TVET) sub sector. 3.2.4 Transport, Public Works, Infrastructure, Energy and ICT 28 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 39. Development of critical infrastructure is key to economic growth as well as key enabler to the implementation of Bottom-Up Economic Transformation Agenda (BETA). The Government will continue to intensify national and regional connectivity through water, road, rail, port, energy and fibre-optic infrastructure in order to achieve socioeconomic transformation in the country, enhance Kenya’s competitiveness, and facilitate cross-border trade and regional integration. 40. Access to improved road infrastructure is a key enabler for socio- economic development. Investment in the road sector, where most of the County roads are motorable has increased connectivity and improved accessibility. Moreover, installation of high mast flood lights has increased hours of doing business thus increased incomes among households. 41. The Government will continue to strengthen the institutional framework for road development in order accelerate the speed of completion of new and stalled road construction projects to cater for the growing population. In order to minimize waste of resource, the Government will ensure all projects are completed within two years and no new project to be launched before the ongoing ones are complete. Over the medium term, the Government will prioritize upgrading and maintaining rural access roads to open up the rural areas to enable farmers to get their produce to market faster and cheaply. 42. The sector’s priority during the plan period is opening of access roads, routine roads maintenance, and supervision of construction works and provision of mechanical services. The key priorities of the department in the FY 2024/25 will be: Periodic/routine maintenance of existing earth/gravel roads; Completion and Improvement of selected county roads to Bitumen standards; Construction of foot bridges; Construction of Box Curvets; Acquisition of roads construction/maintenance machinery. 29 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 43. The Government recognizes that digital economy is the emerging frontier of opportunity, productivity, and competitiveness. In order to entrench Kenya’s lead in digital economy, the Government under the BETA committed to, among other things: i) promote investment in the digital superhighway and the creative economy; ii) support extension of National Optic Fiber Backbone infrastructure to ensure universal broadband availability; and iii) digitize and automate all critical Draft 2024 Budget Policy Statement Government processes throughout the country, with a view of bringing greater convenience to citizens. 44. The Government is committed in leveraging digital prowess to enhance the creative economy’s position as a significant sector and increase its contribution to fashion and value addition to leather and crafts export. The Government will continue protecting intellectual property rights as the foundation of effective monetisation and mainstream the development of arts and culture infrastructure. Further, the Government will extend incorporating the creative economy into the Brand Kenya and commercial diplomacy initiatives, establish a vibrant film ecosystem and facilitate the monetisation of music to promote entrepreneurship. 3.2.5 Trade, Innovation, Industrialization and Tourism 45. The Micro, Small and Medium Enterprise (MSME) Economy contribute very significantly to the economy, employing about 85 percent of non-farm jobs. Access to credit is a stimulant that enhance growth in the MSME economy. However, high interest rates crowd out the private sector and the MSMEs. The Government is committed to ensure Kenyans access affordable credit. Towards this end the County Government through the department of Trade plans to reintroduce the enterprise fund to fund the youthful innovative ideas across the county. 30 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 46. In FY 2024/25, the department will continue with the programme of modernization of markets. To empower the residents of Kericho County, the department will continue to allocate funds to support innovations within the county. 3.2.6 Lands, Housing and Physical Planning 47. As a core pillar in Bottom-Up Economic Transformation Agenda, the Government is committed to ensuring that the constitutional right to accessible and adequate housing is achieved. For this reason, through the Affordable Housing Programme, the Government targets to support provision of at least 250,000 affordable houses to Kenyans every year thereby increase the percentage of affordable housing supply from 2 percent to 50 percent. The Government is on track to facilitate delivery of affordable houses and enable low-cost housing mortgages. 48. As a factor of production, land is critical to economic, social, political, and cultural development. Secure access to land and its sustainable use remains significantly important for employment creation, food security and the socio-economic development of the county. 3.2.7 Environment, Water and Natural Resources 49. The Water, Environment and Natural resources management, and Climate Change sector is one of the devolved sectors with transferred functions to county governments according to Article185 of the Constitution of Kenya (2010). The constitution also entrenches water and healthy environments as constitutional rights of every citizen. 50. In Kenya, more than 90 percent agricultural products are grown in rain- fed farming systems and only 20 percent of land is deemed suitable for rain-fed 31 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 agriculture. The remaining land requires irrigation to ensure optimal production due to inadequate rainfall. To enhance access to safe water for domestic, irrigation and industrial use, the Government has made significant progress by developing the Water (Amendment) Bill, 2023 which seeks to promote private investment in the water sector through the Public-Private Partnerships (PPPs) model. 51. Access to adequate supply of clean water is fundamental for the achievement the pillars of the County Government of Kericho manifesto. Indeed, adequate safe drinking water and sanitation do compliment efforts towards improved primary health care and productivity of labor. 3.2.8 Finance, Administration, and Intergovernmental Relations 52. The public administration sector is a fundamental pillar of the county service delivery framework. It provides overall county leadership, oversight and policy direction; prudent public finance management for transparency and accountability; coordinates county and sectoral development planning; management of population policy; ensures effective and efficient county public service; as well as the development of a sound legislative and regulatory framework. 53. The County Treasury will shift to a digital revenue collection platform (automation) to curb revenue leakages. The key pillars of automation is to introduce pay-bills for the health facilities and other departmental revenue streams and integrate the County Revenue Management System with the revenue collection banks. Budget coordination and management- Consolidation and preparation of annual budget estimates; submitting CABEs to the county assembly for approval; preparation of the Appropriation Bills and Acts; Prepare and publish County Budget Review and Outlook Paper; Capacity building of county employees on County Budget Processes through training and sensitization; Enhanced Consultations; Resource mobilization through 32 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 organizing and participating in County, National and International Conferences. 54. The department will focus on acquisition of asset register for the entire county; Development of a Risk policy document; development and implementation Asset Management Policy and Payment of Pending Bills, adherence to international and national accounting standards. Debt management is a central part of this CFSP, as the County Government aims at reducing pending bills to nil balances. 55. To strengthen expenditure control and improve the efficiency of public spending through strengthening of systems and PFM reforms with a view to enhancing transparency and accountability to provide fiscal space for financing priority programmes focus will be to fast track consideration of reports on budget implementation, audited accounts of the county and its agencies/ corporations, digitization of all payments, review of revenue sources, adoption of e-procurement and expanding automation of public service delivery systems. These activities will go a long way in entrenching good governance and ensuring accountability of public resources. A major focus to all this will be capacity building of our staff with the major area being on budgeting and financial reporting. 33 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 CHAPTER FOUR 4.0 FISCAL POLICY AND BUDGET FRAMEWORK FOR 2024/25 - 2026/27 4.1 Overview 2. The priorities outlined in the Medium-Term Plan of Kenya Vision 2030 and the Third County Integrated Development Plan will guide the development of sector priorities, policies, plans and monitoring and evaluation processes for FY 2024/25 - 2026/27 County MTEF budget. 4.2 Strategic Priorities and Interventions 3. The ultimate goal of the county government is to improve the quality of life for the residents of Kericho County. The CFSP’s strategic priorities and policy goals have therefore been aligned as follows; Strategic Priority 1: Enhanced provision of Quality Health Care and implementation of universal health care to residents. Strategic Priority 2: Promotion of Food Security. Strategic Priority 3: County wide promotion of Infrastructural developments. Strategic Priority 4: Supply and access to quality basic services Strategic Priority 5: Enhancing efficiency and effectiveness in service delivery. 4.3 Fiscal Responsibility Principles for the County Government 4. In line with the Constitution, the Public Finance and Management Act, 2012 sets out the fiscal responsibility principle to ensure that prudent and transparent management of public resources. The PFM law (Section 107) states that: (1) A County Treasury shall manage its public finances in accordance with the principles of fiscal responsibility set out in subsection (2), and shall not exceed the limits stated in the regulations. 34 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 (2) In managing the county government's public finances, the County Treasury shall enforce the following fiscal responsibility principles— (a) the county government's recurrent expenditure shall not exceed the county government's total revenue; (b) over the medium term a minimum of thirty percent of the county government's budget shall be allocated to the development expenditure; (c) the county government's expenditure on wages and benefits for its public officers shall not exceed a percentage of the county government's total revenue as prescribed by the County Executive member for finance in regulations and approved by the County Assembly; (d) over the medium term, the government's borrowings shall be used only for the purpose of financing development expenditure and not for recurrent expenditure; (e) the county debt shall be maintained at a sustainable level as approved by county assembly; (f) the fiscal risks shall be managed prudently; and (g) 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. (3) For the purposes of subsection (2) (d), short term borrowing shall be restricted to management of cash flows and shall not exceed five percent of the most recent audited county government revenue. (4) Every county government shall ensure that its level of debt at any particular time does not exceed a percentage of its annual revenue specified in respect of each financial year by a resolution of the county assembly. 4.4 Fiscal Policy Framework 5. Budget estimates for the FY 2024/2025 and the MTEF shall be based on the priorities that are outlined in the Third County Integrated Development Plan, Budget Policy Statement (BPS 2024), Medium Term Plan (MTP V), and Kenya vision 2030 and the Governor’s manifesto. 4.5 Debt Management Strategy 6. In regard to deficit financing and borrowing, the County Government is aware of the provisions of PFM Act, 2012 and adherence to the 35 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 requirements of these laws is ensured. Section 107(3) (4) of the PFM Act provides as follows: • For the purposes of subsection (2) (d), short term borrowing shall be restricted to management of cash flows and shall not exceed five percent of the most recent audited county government revenue. 7. The County Government will continue to prioritize the payment of all pending bills emanating from the different departments before roll out of new projects and programs in the respective departments. 4.6 FY 2024/25 Budget Framework 8. The 2024/25 budget framework is set against the background of the medium-term fiscal framework, the county government’s strategic objectives and priorities as outlined in the CIDP III and broad development policies in the Governor’s manifesto. 4.7 Revenues projections 9. In FY 2024/25, the County Government targets to raise a total revenue of Kshs. 8.424 billion; Total equitable share of Kshs 6.703 billion, Donor funds Kshs 500.8 million and county own source revenue of Kshs 1.12 billion. 10. The table below provides a summary of all expected sources of revenue and the amounts: - 36 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 COUNTY GOVERNMENT OF KERICHO FINANCIAL YEAR 2023/24 Current Projected Projected Projected % Ratio revenue revenue revenue revenue SOURCES OF REVENUE 2023/24 2024/25 2025/26 2026/27 2024/25 Revenue Description 1.CRA Equitable share 6,703,129,925 6,703,129,925 6,837,192,524 6,973,936,374 79.57% 2.Local Collections 530,071,600 573,742,933 602,430,080 632,551,584 6.81% 3.Facility Improvement Fund 743,350,000 546,355,000 573,672,750 602,356,388 6.49% 4.CONDITIONAL GRANTS 4A. Routine Maintenance Fuel Levy - 4B. User fee Reimbursement - - - - 0.00% 4C. Development of Youth polytechnics fund - - - - 0.00% 4D. Aggregated Industrial Parks 100,000,000 100,000,000 100,000,000 100,000,000 1.19% 5. DONOR FUNDS 5A. DANIDA FUND 9,817,500 9,817,500 9,817,500 9,817,500 0.12% 5B. Agricultural Sector development support Fund(ASDSP II) 1,027,779 1,027,779 1,027,779 1,027,779 0.01% 5C. Transformative health system (world bank) - - - - 0.00% 5D. Kenya Devolution Support Project (world bank) 75,235,659 - - - 0.00% 5E. Climate Smart Agriculture Project (world bank) 90,000,000 90,000,000 90,000,000 90,000,000 1.07% 5F. Kenya Urban Support Program UDG (SIDA) - - - 5G. Kenya Urban Support Program UIG (SIDA) - 5H. Climate Change Institutional Support (World bank) IDA National Agricultural Value Chain Devt Project(NAVCDP) 250,000,000 250,000,000 250,000,000 250,000,000 2.97% 5K. FLOCCA Grants to support climate change CCIR 137,500,000 137,500,000 137,500,000 1.63% 5L. FLOCCA Grants to support climate change CCIs 11,000,000 11,000,000 11,000,000 11,000,000 0.13% 5M. FLOCCA Grants to support climate change CCIs 0.00% 5 M. K-WASH projects 0.00% PEPFAR Grants to County Government of Kericho 1,500,000 1,500,000 1,500,000 0.02% UNSPENT FUND 392,000,044 - Total 8,905,632,507 8,424,073,137 8,614,140,632 8,809,689,624 100.00% 37 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 4.8 Resource Envelope and Allocation Criteria 11. The resource envelope available for allocation among the departments is informed by the guiding principles of ensuring fiscal responsibility and resources will be utilized to meet both recurrent and development expenditure in a ratio of 70% and 30% respectively. 12. The Resource Criteria for Resource Sharing i. Non – discretionary expenditure: In the recurrent expenditure category, nondiscretionary expenditures take the first charge and include statutory obligations such as salaries, gratuity and pension. ii. Development expenditures are shared out on the basis of CIDP priorities as well as strategic interventions to boost revenue base and stimulate the economic growth as outlined in the National Government Policies and Governor’s Manifesto. The development expenditures are estimated at 31 percent. iii. On-going projects: emphasis is given to completion of on-going projects with high impact on poverty reduction, social injustices, employment and wealth creation. iv. Infrastructure projects: with the County government’s commitment to improve infrastructure, construction of roads, development of water and sanitation network and construction of community hospitals/health centers among others will be given priority. 4.9 Expenditure Forecast 13. The County government spending will be guided by the Annual Development Plan 2024/2025 and CIDP III which outlines the proposed projects that will be implemented. The total County expenditure is targeted at Kshs.8.424 billion. Kshs. 5.887 billion and Kshs. 2.536 billion will be set aside for recurrent and development translating into 69.8 and 30.1 percent of recurrent and development expenditures respectively. 38 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 4.10 Medium- Term Expenditure Baseline Ceilings 14. The County is committed to improving the implementation and absorption capacity of projects. Due to the tight fiscal framework involved in budget preparation, the departments will be tasked with rationalizing and prioritizing their expenditures and programmes to ensure that they are in line with the CFSP ceilings. 15. The table below show the ceilings for the 2024/25 budget and projections of the medium term for global, recurrent and development respectively. 39 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 1. Global Consolidated Forecast. COUNTY GOVERNMENT OF KERICHO CONSOLIDATED SUMMARY TOTAL % OF Line Ministries/Departments EXPENDITURE ALLOCATION 2023-2024 2024-2025 2025-2026 2026-2027 2023-2024 1 County Assembly Services 960,791,194 854,746,795 858,360,094 858,360,094 10% 2 Public Service & Administration 470,111,514 384,772,597 391,061,401 412,064,378 5% 3 Office of the Governor & Deputy governor 137,051,145 163,529,508 171,705,983 180,291,282 2% 4 County Public Service Board 71,312,544 92,743,700 97,380,885 102,249,930 1% 5 Finance & Economic Planning 711,676,359 395,313,650 456,293,366 535,693,802 5% 6 Health Services 3,036,255,759 3,057,596,986 3,094,184,895 3,082,686,032 36% Agriculture, Livestock Development & Co-operative 691,301,450 647,281,901 633,039,374 625,821,197 8% 7 Development 8 Education, Libraries, Culture & Social Services 942,588,041 1,008,187,488 1,029,493,958 1,068,762,867 12% 9 Public Works, Roads & Transport 688,760,118 483,885,240 365,497,220 378,525,002 6% 10 Trade, Innovation, Industrialization, Tourism &Wildlife 292,326,207 414,462,597 630,420,205 675,137,384 5% 11 Water, Energy, Natural Resources & Environment 440,442,964 473,397,625 471,135,334 470,768,801 6% 12 Land, Housing & Physical Planning 102,699,078 157,377,302 164,720,874 163,104,244 2% 13 Information, Communication & E-Government 97,498,991 132,421,989 141,728,302 146,249,931 2% 14 Kericho Municipal Board 42,408,572 33,677,879 34,111,773 34,567,361 0% 15 Litein municipal Board 12,408,572 24,677,879 25,061,773 25,464,861 0% 16 STRATEGIC INTERVENTION 208,000,000 100,000,000 50,000,000 50,000,000 10% TOTAL EXPENDITURE 8,905,632,508 8,424,073,137 8,614,140,632 8,809,689,624 100% 2. Recurrent Expenditure RECURRENT % OF Line Ministries/Departments EXPENDITURE ALLOCATION 2023-2024 2024-2025 2025-2026 2026-2027 2023-2024 1 County Assembly Services 882,798,755 844,575,901 844,575,901 844,575,901 15% 2 Public Service & Administration 441,870,257 363,822,257 382,013,369 401,114,038 7% 3 Office of the Governor & Deputy governor 137,051,145 163,529,508 171,705,983 180,291,282 3% 4 County Public Service Board 71,312,544 92,743,700 97,380,885 102,249,930 1% 5 Finance & Economic Planning 273,200,154 335,173,400 351,932,070 417,114,442 6% 6 Health Services 2,752,465,777 2,639,029,486 2,649,933,857 2,678,617,494 46% Agriculture, Livestock Development & Co-operative 172,779,671 176,039,917 235,658,320 298,257,643 3% 7 Development 40 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 8 Education, Libraries, Culture & Social Services 768,979,234 747,979,234 785,378,196 824,647,105 10% 9 Public Works, Roads & Transport 98,319,101 96,808,742 101,649,179 106,731,638 2% 10 Trade, Innovation, Industrialization, Tourism &Wildlife 64,123,265 66,659,086 69,992,041 73,491,643 1% 11 Water, Energy, Natural Resources & Environment 158,437,690 183,494,615 192,669,346 202,302,813 3% 12 Land, Housing & Physical Planning 80,676,136 75,302,302 79,067,418 83,020,788 2% 13 Information, Communication & E-Government 53,836,604 86,126,262 90,432,575 94,954,204 1% 14 Kericho Municipal Board 5,408,572 8,677,879 9,111,773 9,567,361 0% 15 Litein municipal Board 4,408,572 7,677,879 8,061,773 8,464,861 0% TOTAL EXPENDITURE 5,965,667,478 5,887,640,169 6,069,507,882 6,325,343,601 100% 3. Development Expenditure DEVELOPMENT Line Ministries/Departments EXPENDITURE 2023-2024 2024-2025 2025-2026 2026-2027 2023-2024 1 County Assembly Services 77,992,439 10,170,894 13,784,193 13,784,193 0% 2 Public Service & Administration 28,241,257 20,950,340 9,048,032 10,950,340 1% 3 Office of the Governor & Deputy governor - - - - 0% 4 County Public Service Board - - - - 0% 5 Finance & Economic Planning 438,476,205 60,140,250 104,361,296 118,579,360 2% 6 Health Services 283,789,982 418,567,500 444,251,038 404,068,538 17% Agriculture, Livestock Development & Co-operative 518,521,779 471,241,984 397,381,054 327,563,554 19% 7 Development 8 Education, Libraries, Culture & Social Services 173,608,807 260,208,254 244,115,762 244,115,762 10% 9 Public Works, Roads & Transport 590,441,016 387,076,498 263,848,041 271,793,364 15% 10 Trade, Innovation, Industrialization, Tourism &Wildlife 228,202,942 347,803,511 560,428,164 601,645,741 14% 11 Water, Energy, Natural Resources & Environment 282,005,274 289,903,010 278,465,988 268,465,988 11% 12 Land, Housing & Physical Planning 22,022,942 82,075,000 85,653,456 80,083,456 3% 13 Information, Communication & E-Government 43,662,387 46,295,727 51,295,727 51,295,727 2% 14 Kericho Municipal Board 37,000,000 25,000,000 25,000,000 25,000,000 1% 15 Litein municipal Board 8,000,000 17,000,000 17,000,000 17,000,000 1% 16 STRATEGIC INTERVENTION 208,000,000 100,000,000 50,000,000 50,000,000 4% TOTAL EXPENDITURE 2,939,965,031 2,536,432,968 2,544,632,750 2,484,346,023 100% 41 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4 8.0 CONCLUSION 16. Public participation was carried out across the County in each of the six Sub counties and specific projects identified by the community. These projects will be streamlined into their respective line ministries for implementation. However, emphasis will be given to the ongoing projects to ensure completion and operationalization of the same. 17. This County Fiscal Strategy Paper was prepared in line with the National Government Budget Policy Statement 2024. 42 K e r i c h o C o u n t y F i s c a l S t r a t e g y P a p e r 2 0 2 4