EMBU COUNTY GOVERNMENT COUNTY TREASURY COUNTY FISCAL STRATEGY PAPER FY 2021/2022 BUILDING BACK BETTER: STRATEGY FOR RESILIENT AND SUSTAINABLE ECONOMIC RECOVERY FEBRUARY 2021 FOREWORD This is the seventh Fiscal Strategy Paper since the operationalization of the County Governments Kenya. It has been prepared against a background of contracting global economic occasioned by the outbreak and the rapid spread of covid 19 pandemic. The pandemic and the ensuing containment measures have devastated countries economy disrupting businesses and livelihoods. At the county level, Embu County has not been spared of the negative impact of the pandemic. The pandemic and resultant containment measures have adversely affected businesses and economic activities in all the sectors. The CFSP sets out county policy goals and strategic priorities that will be the basis for formulation of County’s Financial Year 2021/22 budget over the Medium Term. The Paper is prepared in accordance with the Public Finance Management Act, 2012. The focus of policies is to continue enabling environment for economic recovery to safeguard the livelihoods, jobs, businesses and industrial recovery. In this respect, the county government of Embu will strengthen implementation of programmes and measures that ensure a more inclusive growth and foster macroeconomic stability. The County priorities and goals outlined here are based on the County Integrated Development Plan with emphasis on investment in: food security, Infrastructure development, domestic water connectivity, accessibility to affordable health care and early childhood development education. These priorities shall form the basis for formulation of FY 2021/22 budget. The paper therefore links county planning and budgeting which is the main objective of the Medium Term Expenditure Framework. The paper covers the following broad areas: recent economic developments and the economic outlook; fiscal performance of FY 2020/21 and half year of FY 2021/22; highlights of the; broad strategic priorities and policies for the Medium Term and the Medium Term Fiscal Framework. 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. DR. JOHN NJERU NJAGI COUNTY EXECUTIVE COMMITTEE MEMBER FINANCE, PLANNING AND ECONOMIC AFFAIRS i ACKNOWLEDGEMENT This County Fiscal Strategy Paper (CFSP) outlines the broad strategic macroeconomic issues and fiscal framework, together with a summary of County Government spending plans, as a basis of 2020/21 budget and the medium- term. We expect the document to improve the public’s understanding of the County’s public finances and guide public debate on economic and development matters. The input for the CFSP 2021 was obtained from the County Budget Review and Outlook Paper (CBROP) 2020 as well as the County Annual Development Plan 2021/22. Further, public participation forums provided a major avenue for the community to highlight their needs which have been considered in the preparation of the paper. A core team in the Finance and Economic Planning department spent a significant amount of time putting together this Paper. We are particularly grateful to the County Executive Committee member Finance, Planning and Economic Affairs, Dr. John Njagi for his able leadership and Director Planning and Economic Affairs, Mr. Lawrence M. Nzioka for coordinating the execution of this task. Special thanks go to the following members of the team that met and worked tirelessly to prepare this document: Mr. Pius Mukundi, Mr. Edwin Rugendo, Mr. Boniface Muli Lova, Ms. Catherine Gathee, Mr. Linus Mugambi, Mr. Erick Kinyua, Mr. Katana Ndune, Mr. Joshua Mwangi, Mr. Peter Njeru and Mr. Charles Njagi. Since it would not be possible to list everybody individually in this page, I would like to take this opportunity to thank the entire staff of the Finance, Planning and Economic Affairs docket for their dedication, sacrifice and commitment to public service. RUTH NDIRANGU CHIEF OFFICER FINANCE, PLANNING & ECONOMIC AFFAIRS ii Legal Basis for the Publication of the County Fiscal Strategy Paper County Fiscal Strategy Paper (CFSP) is published in accordance with Section 117 of the Public Financial Management Act 2012 which provides that: 1) The County Treasury shall prepare and submit to the County Executive Committee the County Fiscal Strategy Paper for approval and 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 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 (c) Any interested persons or groups (d) Any other forums 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 finalizing the budget proposal for the financial year concerned. 8) The County treasury shall publish and publicize the County Fiscal Strategy Paper within seven days after it has been submitted to the County Assembly. iii Fiscal Responsibility Principles in the Public Finance Management Law The Public Finance Management (PFM) Act, 2012 section 107(2) sets out the following fiscal responsibility principles to ensure prudency and transparency in the management of public resources; 1) The County Government’s recurrent expenditures shall not exceed the County government’s total revenue. 2) Over the Medium Term, a minimum of thirty percent of the county Government’s budget shall be allocated to the development expenditures. 3) The County Governments' expenditures on wages and benefits for its public officers shall not exceed a percentage of the county government's total revenue as prescribed by the Executive Committee Member for Finance in regulations and approved by County Assembly. 4) Over the Medium Term the government's borrowing shall be used only for the purpose of financing development expenditure and not for recurrent expenditure. 5) The county debt shall be maintained at sustainable level as approved by county assembly. 6) The fiscal risks shall be maintained prudently; and 7) A reasonable degree of predictability with respect to the level of tax rates and tax bases shall be maintained taking into account any tax reforms that may be made in the future. iv TABLE OF CONTENTS FOREWORD ................................................................................................................................................. I ACKNOWLEDGEMENT .......................................................................................................................... II TABLE OF CONTENTS ............................................................................................................................ V LIST OF TABLES ...................................................................................................................................... VI ABBREVIATION ..................................................................................................................................... VII 1. OVERVIEW ........................................................................................................................................................ 1 2. NEED FOR AUSTERITY MEASURES ...................................................................................................................... 1 3. RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK ....................................................................................... 3 4. EMBU COUNTY SPECIFIC RISKS AND MITIGATION MEASURES .......................................................................... 4 II. ECONOMIC PERFORMANCE OF THE DEPARTMENTS ............................................................. 8 III. UPDATE ON FISCAL PERFORMANCE ........................................................................................ 14 6. TRANSFER FROM NATIONAL GOVERNMENT ....................................................................................................... 14 7. REVENUE COLLECTION ..................................................................................................................................... 15 IV FISCAL POLICY AND BUDGET FRAMEWORK .......................................................................... 18 8. PRUDENT FISCAL POLICY .................................................................................................................................. 19 9. OBSERVING FISCAL RESPONSIBILITY PRINCIPLES ............................................................................................... 20 10. FISCAL STRUCTURAL REFORMS .......................................................................................................................... 20 11. 2021/2022 BUDGET FRAMEWORK ..................................................................................................................... 21 12. REVENUE PROJECTIONS .................................................................................................................................... 22 13. EXPENDITURE FORECASTS ................................................................................................................................ 23 14. RECURRENT EXPENDITURE................................................................................................................................ 23 15. DEVELOPMENT ................................................................................................................................................. 25 16. OVERALL DEFICIT FINANCING ........................................................................................................................... 26 V. COUNTY MEDIUM TERM EXPENDITURE FRAMEWORK ...................................................... 27 DETAILS OF SECTOR PRIORITIES ........................................................................................................................................ 27 CONCLUSION ........................................................................................................................................... 33 ANNEX I: TOTAL EXPENDITURE CEILINGS FOR THE FY 2021/22 ............................................... I ANNEX II: TOTAL EXPENDITURE CEILINGS FOR THE MTEF PERIOD 2021/22 – 2023/24 .... II ANNEX III: SECTOR CEILINGS FOR THE MTEF PERIOD 2021/22 – 2023/24 ............................. III v LIST OF TABLES Table 1: Revenue breakdown for FY 2019/20 ...................................................................... 14 Table 1: County Fiscal Projections 2021/22 -2023/24 .......................................................... 21 Table 2: Recommended Personnel Emolument ceilings for FY 2021/22 ............................. 23 Table 3: Recommended Operations ceilings for FY 2021/22 ............................................... 24 Table 4: Development Sector Ceilings for the FY 2021/2022 .............................................. 25 vi ABBREVIATION AiA Appropriation in Aid BPS Budget Policy Statement CFSP County Fiscal Strategy Paper CIDP County Integrated Development Plan CPSB County Public Service Board FY Financial Year IGAs Income Generating Activities MTEF Medium Term Expenditure Framework PFMA Public Finance Management Act vii RECENT ECONOMIC DEVELOPMENTS AND MEDIUM-TERM OUTLOOK 1. Overview In 2020, the Kenyan economy was adversely affected by the outbreak of Covid-19 Pandemic. This was followed by stringent Covid-19 containment measures which have not only disrupted the normal lives and livelihoods, but also to a greater extent businesses and economic activities. This has an adverse effect in our economy which contracted by 5.7 percent in the second quarter of 2020 from a growth of 4.9 percent in the first quarter in 2020. The economy is therefore estimated to slow down to a growth of around 0.6 percent in 2020 from the earlier projection of 2.6 percent in the 2020. Economic growth is projected to recover to 6.4 percent in 2021 due to in part, the lower base effect in 2020. In terms of fiscal years, economic growth is projected to grow by 3.5 percent in FY 2020/21 and further to 6.2 percent over the medium term. The economy continues to register macroeconomic stability with low and stable interest rates and a competitive exchange rate that support exports. Year-on-year overall inflation remained within the Government target range of 5±2.5 percent in December 2020 at 5.6 percent from 5.8 percent in December 2019. This lower inflation was mainly supported by a reduction in food prices. The foreign exchange market has largely remained stable but partly affected by a significant strengthening of the US Dollar in the global markets and uncertainty with regard to the Covid-19 pandemic. Despite this, the current account deficit is estimated to improve to 5.1 percent in 2020 from 5.8 percent in 2019 mainly supported by an improvement in the trade balance. 2. Need for austerity measures Since the first case of COVID-19 was reported in Kenya on March 13, 2020, Embu County has been experiencing massive destruction of the economy in terms of GDP decline and job losses especially the service sectors .This was followed by total lockdown in Nairobi and Mombasa city which is our major entry of imported and exported goods. This affected the flow of goods from these cities to main lands, Embu happens to be among them. The president introduced Covid tax relief measures such as; 100 per cent Tax Relief for persons earning gross monthly income of up to Kshs 24,000; reduction of Income Tax Rate (Pay-As-You- Earn) from 30 per cent to 25 per cent ; reduction of Resident Income Tax (Corporation Tax) from 30 per cent to 25 per cent; reduction of the turnover tax rate from the current 3 per cent to 1 per cent for all Micro, Small and Medium Enterprises (MSMEs); reduction of the VAT from 16 per 1 cent to 14 per cent, effective 1st April,2020, and Kenya Revenue Authority (KRA) directed to expedite the payment of all verified Value Added Tax (VAT) refund claims amounting to Kshs 10 Billion within 3 weeks; or in the alternative, allow for offsetting of Withholding VAT, in order to improve cash flows for businesses. All these measures created revenue short falls as projected by KRA triggering further pending bills and delayed payments of both recurrent and development expenditures in the county which has not only affected the normal livelihoods but also to a greater extent business and economics activities. The county is experiencing tough economic times as growing food prices and rising fuel costs takes a swipe at consumers spending abilities .In addition the current invasion of locust in the county have affected negatively food security and livestock pastures especially the marginal areas in the county. The County Government will continue embracing public, private partnership to exploit all potential and sectors that leverage the private sector to generate the much-anticipated wealth and employment opportunities as well as create an enabling environment that has favorable incentives to attract more investors. The county Government will continue embracing a market-based economy with a liberalized internal and external trade system with other counties in order to stimulate economic growth and development hence creating more jobs for the youth. Major economic sectors to focus on include agriculture, forestry, fishing, mining, manufacturing, energy, tourism and financial services. The county is focusing on this CFSP 2021 in order to reduce unemployment and under-employment, by spending sufficiently on social and economic overheads. These expenditures would help to create more employment opportunities and increase the productive efficiency of the economy and cushion further effects of Covid 19 in the county. The county remains focused on encouraging investments that have long term impact on job creation and income generation for the vast majority of the people in the county, especially the youth. Specifically, the county will focus on five core areas which are aligned to the ‘Big 4 Agenda’ outlined below:  Developing, expanding and maintaining the county infrastructure including opening of road networks and housing units;  Achieving universal health care and improving county education;  Increasing water reticulation and distribution as well as environmental protection and access to clean and safe water for all; 2  Enhancing the protection and mainstreaming of the disadvantaged populations such the aged, youth, women and Differently Abled Persons; and  Promotion of trade development, industrial growth and investment in the County. In conclusion the county will embrace the fiscal policies which create macroeconomic conditions that will create aggregate demand for goods and services, employment and economic growth. 3. Recent Economic Developments and Outlook I. Global Outlook The outbreak and spread of the Covid-19 Pandemic and the ensuing containment measures have devastated global economies. As a result, the global economy is projected to contract by 4.4 percent in 2020 from a growth of 2.8 percent in 2019. This economic outlook is worse than the growth reported during the 2008 - 2009 global financial crisis. Advanced economies are projected to contract by 5.8 percent in 2020 from a growth of 1.7 percent in 2019. Significant contraction of the economy is projected in the United States (-4.3 percent), Japan (-5.3 percent) and the United Kingdom (-9.8 percent). Growth in the Euro area is expected to contract by 8.3 percent in 2020 from a growth of 1.3 percent in 2019. The emerging markets and developing economies are also projected to contract by 3.3 percent in 2020 from a growth of 3.7 percent in 2019. All major economies are projected to contact in 2020 except China which is projected to grow by 1.9 percent, a slowdown from a growth of 6.1 percent in 2019 II. Regional Outlook The Sub-Saharan African region has not been spared the negative impact of the pandemic with the region projected to contract by 3.0 percent in 2020 from a growth of 3.2 percent in 2019. The largest impact of the crisis on growth has been for tourism-dependent economies, while commodity- exporting countries have also been hit hard. Growth in more diversified economies will slow significantly, but in many cases will still be positive in 2020. Growth in the East African Community (EAC) region is estimated to slow down to 1.0 percent in 2020 compared to a growth of 6.2 percent in 2019. This growth will be supported by positive growths 3 in Kenya, Tanzania and Rwanda. Economic activities in Burundi and Uganda are expected to contract in 2020. III. Domestic/County Outlook Prior to the outbreak of Covid-19 pandemic, county’s economy was strong and resilient despite the challenging country environment. The broad-based economic growth for 2018 and 2019 averaged 5.9 percent outperforming the 5.5 percent for the previous 5 years (2013 to 2017) and the average growth rate of 4.7 percent in the period 2008 to 2012. In 2020, the Embu economy was adversely affected by the outbreak of Covid-19 Pandemic and the swift containment measures, which have not only disrupted the normal lives and livelihoods, but also to a greater extent businesses and economic activities. As a result, our economy is estimated to slow down to around 0.6 percent in 2020 from a growth of 5.4 percent in 2019. Looking ahead, the economy is projected to recover and grow by about 6.4 percent in 2021 and above 6.2 percent over the medium term. The economy grew in the first quarter of the year but the remaining quarters of the year 2020 was affected by the pandemic. 4. Embu County specific Risks and Mitigation Measures I. The country’s economic performance Success in then implementation of the 2020/2021 financial year budget will be determined by the country’s prevailing economic environment. Occurrence of either internal or external economic shocks will have a negative impact to the performance of the County since it will affect allocation of the funds to the county from national government. Mitigation measures: The County develops and implements innovative mechanisms to increase its local revenue while at the same time ensuring austerity in public spending. Already, an E-revenue platform (Embu Pay) is operational. II. Underperformance in Local Revenue collection Underperformance of revenue collection has continued to be a major challenge towards achieving the development agenda of the county. The revenue targets have continued to be quite ambitious though attaining desired levels of revenue collection has often proven elusive. There is need to placed sound policies and strategies that will guarantee optimum revenue collection to meet the anticipated budgetary requirements. Revenue collection should not only be strengthened 4 in the traditional revenue streams. There is need to explore new avenues for revenue collection. This will call for increased budgetary provision to invest in revenue collection channels and processes to enhance overall collection. Mitigation measure: In the medium term, the County will continue to undertake measures aimed at expanding the revenue base and increasing tax compliance through integration of technology in revenue collection. The expansion of ECRA that is mandated with revenue collection and administration through employment of revenue managers and collectors will significantly increase the local revenues collected. III. Huge Wage Bill Regulation 25 (1) (b) of the PFM (County Governments) requires that County wage bill shall not exceed 35% of the total revenue. However, the 2019/20 compensation to employees’ allocation was 49 % of the total revenue. For 2020/21, the compensation to employees constitutes 51.3% an increase of 2.3 percent. The continued increase in the wage bill has arisen due to factors which are beyond the county government. The county is disadvantaged by the current revenue distribution formula, which takes no account of inherited non-discretionary devolved costs, the county inherited staffs from the four local authorities and owing to the fact that Embu was the Headquarters of the former Eastern Province, it carries majority of the devolved staff. The ongoing nurse’s strike in some counties including Embu by the healthcare workers to enforce their Collective Bargaining Agreements (CBAs) will definitely have an impact on the county’s wage bill. Mitigation measures: The county will put necessary measures in the attempt to curb wage bill through having an approved organization structure and staff establishment, stopping recruitment of non-essential staff and those not in the approved staff establishment and ensuring appropriate engagement of casuals and payment of salaries through IPPD to enhance efficiency in HR management IV. Pending Bills The county has continued to be plagued by the occurrence of pending bills. These Pending debts/bills present a serious economic policy challenge facing the County government of Embu owing to their disruptive nature as they consume current year resources at the expense of planned development programs and projects. From all the departments, the county’s pending bills currently stand at Kshs. 5 1.4 billion. These bills have accrued over the financial years with existence of pending bills dating back to 2014/2015 financial year. Mitigation measure: The county government should therefore ensure that both the level and rate of growth in debt is fundamentally sustainable as high debt will continue to impact negatively on the county operations. This will be done by increasing and revising the county’s own source revenue targets to realistic and achievable targets. Unachieved revenue targets create budget gaps which at long run result to a number of unpaid expenditures (pending bills). In addition however, funds shall be allocated in the budget for debt servicing. 5. Building Back Better: Strategy For Resilient And Sustainable Economic Recovery The Covid-19 Pandemic has devastated global economies with Kenya not being spared. On the domestic front, the economic impact of the Pandemic is already being felt across all sectors of the economy. Thus, 2021 CFSP is premised on the need to urgently overcome the immediate socio- economic challenges that the country faces today. At the heart of the policies in this document, is the desire to foster a conducive environment critical to return the economy back to our long term growth path, while at the same time, providing impetus for building a cohesive and prosperous Kenya. The 2021 CFSP, therefore articulates priority economic policies and structural reforms as well as sectorial expenditure programs to be implemented under the Medium Term Expenditure Framework for FY 2021/22– 23/24 in order to achieve the Government’s development goal of economic transformation for a shared prosperity. To respond to the current challenges and cushion Kenyans and businesses from the adverse effects of the Pandemic, the Government is currently implementing an Economic Stimulus Programme - whose objective is to return the economy to the growth trajectory it was on pre-Corona by increasing demand for local goods and services, cushioning vulnerable Kenyans, securing household food security for the poor, and creating employment and incomes. Great gains have been realized under the Program including: job creation for our youth under the “Kazi Mtaani” Program; enhanced liquidity to support businesses through monetary measures that were introduced; and enhanced cash transfers to the vulnerable and the emerging urban vulnerable as a result of the Pandemic. Building on the gains made, the Government is finalizing a Post Covid-19 Economic Recovery Strategy (ERS) which will mitigate the adverse impacts of the Pandemic on the economy and further re-position the economy on a steady and sustainable growth trajectory. Successful implementation of 6 the Post-Covid-19 ERS is predicated on faster implementation of policy, legal and institutional reforms that are necessary for effective implementation of the Strategy. The Government will ensure that all the proposed policies and legislation are implemented within the specified time lines. The capacity of institutions, such as State Law Office and National Law Reform Commission, to draft legislation in a timely manner will also be enhanced. In this regard, the Parliamentary Calendar will be amended to accommodate the passing of key legislations required to facilitate implementation of the Post-Covid-19 ERS. Further, the Government will accelerate implementation of the “Big Four” Agenda which has gained traction over the past three years. The Agenda is designed to help achieve the social and economic pillars of our Vision 2030 and the development aspirations espoused in the Kenyan Constitution. Actualization of policies and programs under each pillar is expected to accelerate and sustain inclusive growth, create opportunities for decent jobs, reduce poverty and income inequality and ensure that we create a healthy and food secure society in which Kenyans have access to affordable and decent housing. Priority Pro-Growth Policy Measures As indicated above, the 2021 CFSP, articulates measures that will stimulate growth, promote job creation, reduce poverty, protect the vulnerable groups and businesses. To achieve these, the Government will: ▪ Roll out the Post-Covid-19 Economic Recovery Strategy ▪ harnessing the implementation of the “Big Four” Agenda for job creation; ▪ Foster a secure and conducive business environment by maintaining macroeconomic stability, enhancing security; improving business regulations; ▪ Fast track development of critical infrastructure in the country such as roads, rail, energy and water, among others, so as to reduce the cost of doing business as well as promote competitiveness; ▪ Transform economic sectors for broad based sustainable economic growth; ▪ Improve access to education, strengthen health care systems and enhance cash transfers to support the vulnerable members of our society; 7 ▪ Support youth, women and persons with disability to enable them actively contribute to the economic recovery agenda; and ▪ Implement various structural reforms to enhance the efficiency of public service delivery while at the same time ensuring accountability for better macroeconomic and fiscal stability, sustained credit ratings, improved fiscal discipline and minimized corruption. II. ECONOMIC PERFORMANCE OF THE DEPARTMENTS Public Service, Administration and Devolution. 8 Key achievements in FY 2019/2020  Rehabilitation and equipping of majimbo fire station  Formulated nine bills and policies Challenges  Low allocations to the Department.  Reallocation of funds to other departments and delays in disbursements of funds Finance and Economic Planning Key achievements in FY 2019/2020 and 2020/2021  Implementation of the budget process implementation through; preparation of budget Estimates, preparation of budget review and outlook papers, preparation of Progress reports, preparation of Fiscal Strategy Papers, preparation of annual development Plans.  Capacity building activities in the following key focal areas; Public Financial Management, Planning, Monitoring and Evaluation, human Resource and Performance Management, Devolution and Inter-governmental Relations and Civic Education and Public Participation. Challenges  There has been a delay in the release of funds by the National Government  Underperformance in revenue collection Lessons Learnt and Recommendations  There have been leakages in revenue collection leading to unfavorable performance and missed revenue targets. The County continues to automate revenue streams to address the issue of revenue leakages. Infrastructure, Public Works, Housing and Energy. Key achievements in FY 2019/2020  In the transport sector, 6km of roads were tarmacked against the set target of 15km  The target for road murraming and gravelling was 375km of which 365km was murramed and 145 graveled.  Having a set target of constructing 2 bridges and 10 drifts, 4 bridges and 12 drifts were constructed which was beyond the expected.  To ensure enough power supply, 10 transformers were aimed at being installed of which 7 were installed.  There was an over performance in construction of floodlights by 15.  In line with energy development still, they had targeted 5km to have street lights.5 markets got connected and 8 others done by the World Bank.  Training to develop building technologies and demonstrations was done in all sub-counties. 9 Challenges  Lack of vehicles to be used by officers for their supervision work  Inadequate additional technical staff and administrative officers.  Limited resources to support roads demands  Rigorous procurement process  Opening of development vote in the IFMIS has remained a continuous challenge  Pending bills Health and Level 5 Hospital Key achievements in FY 2019/2020  Renovation of Nyayo wards 9  Purchase and installation of equipment for molecular laboratory  Upgrading of electrical power house equipment  Purchase of cold room equipment for mortuary funeral home  Equipping of biomedical engineering workshop  Construction of Badea Ward Block ongoing  Construction and equipping of health facilities Challenges  Huge unpaid bills  Delay due of slow e-procurement process.  Inadequate equipment for medical services. Education, Science and Technology Key achievements in FY 2019/2020  Provision of furniture at ECDE centres was fully accomplished.  All classrooms which were to be constructed in ECDE’s were achieved.  All the 50 ECDE centres were facilitated with play equipment.  Vocational training centres benefited from construction of classrooms, dormitories and other equipment.  There was purchase of training materials and fittings in VTC’ Office of Governor Key achievements FY 2019/2020  Payment of medical insurance for the executive 10  Developed five policies  Trained fifty staff members Challenges  Inadequate resources Public Service Board Key achievements FY 2019/2020  Enumerated 450 employees  Trained ten staff members Challenges  Inadequate resources  Reallocation of funds to other departments Trade, Tourism, Investment and Industrialization Achievements  Two markets constructed  Six toilets constructed  Eight market sheds constructed  Three floodlights installed  Completion of Kiritiri bus park  Nine Boda boda sheds constructed  One Water tank constructed Challenges  Pending bills  Inadequate resources  Inadequate staffing Agriculture, Livestock, Fisheries and Cooperative development a) Key achievements in FY 2019/2020  200 farmer groups supported across the county  98 tons of assorted subsidized farm inputs issued through voucher system  5 policies developed  5 plant operators employed 11  KCEP supported 800 farmers to produce sorghum and green grams  Slap for milk processing plant done Challenges  Low absorption of funds  Delayed disbursement of funds to implement activities  Ageing staff in the department with no new recruitments  Delayed budget approvals and reallocation of funds leading to pending bills  Slow in the project implementation by the contractors  Agricultural Training Centre displaced by University of Embu Lesson learnt  Strong working relations with collaborators and stakeholders is desirable for optimal performance  Refresher courses for staff and new employment to fill gap of retiring officers  Proper identification of the projects through community participation  Aggressive marketing of departmental projects programs should be undertaken. Lands, Physical Planning, Urban Development & Housing, Water and Irrigation, Environment and Natural Resources a) Key achievements in FY 2019/2020  Tarmacking of KPLC- AP line road  Tarmacking of Dallas slum fiddler road  Improvement and shifting of Embu sewage system on-going  Developed an integrated Forest management plan  Cleaning of towns- Ensuring all the towns are cleaned, garbage managed and disposed of in the right manner  Carried out Environmental Social Impact Assessment for the proposed projects done  Extension of distribution lines done, purchase of pipes and water kiosks opened Challenges  Inadequate budget for planning, survey and greening.  Delayed execution of the budget  System (IFMIS) related challenges posing threat to budget execution.  Delayed payments to suppliers occasioned by delayed disbursements.  Lack of personnel in the department especially Physical Planners, surveyors and values.  Process of procuring land for public use has its own technicalities and thus do not follow the same process of procuring goods and services. 12  Lack of departmental vehicles as land services requires mobility.  Reallocation of funds lending to pending bills  Introduction of new projects that were not there during budget preparations, creating confusion in the department - introduced through ward fund  Reallocation of money in the supplementary Budget.  Extension of distribution lines done, purchase of pipes and water kiosks opened  Rehabilitation of boreholes and sand dams done  5 irrigation schemes supported Lessons Learnt  Community participation is key to ownership and sustainability of projects  Laws, regulations and guidelines should be followed to guide development to guard against competing interests Youth Empowerment and Sports, Gender, Children Culture and Social Services. Key achievements in FY 2019/2020  Operationalization of talent academy. Challenges  Delay due of slow e-procurement process.  Reallocation of money in the supplementary Budget. 13 III. UPDATE ON FISCAL PERFORMANCE 6. Transfer from National Government In FY 2019/20, the County had a total revenue basket amounting to Ksh. 6,780,224,341. The equitable share from the national treasury had the highest contribution at Ksh. 4,304,400,000. The targeted ordinary local revenue was Ksh. 531,000,000 while Appropriation in Aid collection target was Ksh. 389,000,000. Table 1 provides a breakdown of various revenue sources. Table 1: Revenue breakdown for FY 2019/20 Revenue Sources Revised Supplementar y II 2019/20 Equitable Share of revenue from National Government 4,304,400,000 Conditional Grant to the Level Five Hospital 301,040,462 Conditional Allocation for Development of Youth Polytechnics 33,603,298 Conditional Grant for Compensation for User Fees Forgone 10,724,225 Conditional Grant for Leasing of Medical Equipment 131,914,894 Conditional Grant from Road Maintenance Fuel Levy Fund 122,183,250 Transforming Healthcare Systems for Universal Care Project 44,569,827 THSUCP) THSUCP Surplus Disbursed Funds (Part of 2020/2021Allocation) 93,598 Agricultural and Rural Inclusive Growth Project (NARIGP) 350,000,000 Kenya Devolution Support Programme (KDSP)- level 1 30,000,000 Kenya Urban Support Project (KUSP) 119,892,100 Kenya Urban Support Project (KUSP)-Urban Institutional Grant 8,800,000 (UIG) Universal Healthcare in Devolved System Program (DANIDA) 13,312,500 AgriFose programme (Swedish Government) Agriculture 15,418,468 Department Local sources 531,000,000 Other local Revenue Sources– Ministerial 389,000,000 2018/2019 Unspent Balances (CRF recurrent and Development) 160,603,490 2018/2019 Unspent balances for conditional allocations and loans& 213,668,230 grants. TOTAL 6,780,224,341 14 It is evident that Equitable share contributes the highest proportion of revenue to the County Government accounting for 63.5 percent of the total revenue. Conditional grants account for 17.4 percent while local revenue that comprises both ordinary local revenue and Appropriation in Aid account for 13.6 percent of the total revenue. Unspent balances from FY 2018/19 accounted for 5.5 percent of the overall revenue. Figure 1 depicts a visual representation of the contribution of each revenue source to the revenue basket. Figure 1: Revenue sources contribution to the resource basket FY 2019/20 Unspent Balances Local Revenue 2018/19 13.6% 5.5% Equitable Share 63.5% Conditional Grants 17.4% 7. Revenue Collection The County government approved Kshs 920,000,000 as local revenue in the FY 2019/2020. The actual local revenue collected for the FY 2019/20 amounted to Ksh. 509,651,141 comprising of ordinary local revenue at Ksh. 226,098,461 and Appropriation in Aid at Ksh. 283,593,698. Further analysis shows an increasing trend from the month of January 2020, February 2020 and peaking in the month of March 2020 which stood at about Ksh. 56.61 million but declined in the month of April to about 22.72 million. Figure 3 shows the trend for the period between July 2019 and June 2020. 15 Figure 2: Embu county local revenue FY 2019/20 60M 56.61M 50.69M 50M 47.77M 47.65M 45.55M 41.46M 40M 41.09M 40.04M 39.52M 37.55M 39.01M 30M 22.72M 20M 10M M A deeper analysis of revenue collected during the FY 2019/20 shows that the third quarter had the largest share of local revenue collected at about Ksh. 144.29 million while the fourth quarter had the lowest collection standing at about Ksh. 107.8 million due to Corvid-19 effects. In the first half of 2020/21 and 2019/20 financial years, local revenue of Ksh. 59,542,865 and Kshs. 97,734,782 was collected respectively. This represents a 39.08% reduction of Kshs. 38,191,917 less having been collected in the same period of the current financial year. This indicates that the county may not realize the targeted revenue. Local Revenue for FY 2020/2021 and FY 2019/2020 Revenue Source FY 2020/2021 (By 31st December 2020) FY 2019/2020 (By 31st December 2019) Annual Half Year Actual Achievement Annual Half Year Actual Achievement Target Target Achievement (%) Target Target Achievement (%) Single Business 114,635,000 57,317,500 12,180,305 21.25% 113,500,000 56,750,000 14,463,256 25.49% Permit House Stall 20,200,000 10,100,000 2,003,218 19.83% 20,000,000 10,000,000 2,781,105 27.81% Market fees 30,300,000 15,150,000 7,491,985 49.45% 30,000,000 15,000,000 12,622,824 84.15% Street and Bus 40,400,000 20,200,000 6,168,502 30.54% 40,000,000 20,000,000 13,582,890 67.91% Parking Fees Cess 60,600,000 30,300,000 22,716,530 74.97% 60,000,000 30,000,000 40,389,234 134.63% Land Rates and 197,960,000 98,980,000 3,468,626 3.50% 196,000,000 98,000,000 6,143,125 6.27% Plot Rents Enforcement 1,515,000 757,500 393,637 51.97% 1,500,000 750,000 395,575 52.74% Technical 15,150,000 7,575,000 1,778,140 23.47% 15,000,000 7,500,000 2,472,652 32.97% planning Fees Administration 1,010,000 505,000 1,674,700 331.62% 1,000,000 500,000 1,154,813 230.96% Fees 16 Advert Fees 25,250,000 12,625,000 939,852 7.44% 25,000,000 12,500,000 2,435,771 19.49% Slaughter House 3,030,000 1,515,000 631,100 41.66% 3,000,000 1,500,000 527,060 35.14% fees Miscellaneous 2,020,000 1,010,000 96,270 9.53% 2,000,000 1,000,000 766,477 76.65% revenue Stock fees 3,030,000 1,515,000 0 0.00% 3,000,000 1,500,000 0 0.00% Water Charges 1,010,000 505,000 0 0.00% 1,000,000 500,000 0 0.00% TOTAL 516,110,000 258,055,000 59,542,865 23.07% 511,000,000 255,500,000 97,734,782 38.25% Summary of AiA for FY 2020/2021 and FY 2019/2020 Name of Sector FY 2020/2021 (By 31st December 2020) FY 2019/2020 (By 31st December 2019) Annual Target Half Year Actual Achievement Annual Half Year Actual Achievement Target Achievement (%) Target Target Achievement (%) Trade, Tourism, 25,250,000 12,625,000 0 0.00% 25,000,000 12,500,000 1,595,007 12.76% Investment and Industrialization Lands, 3,030,000 1,515,000 0 0.00% 3,000,000 1,500,000 0 0.00% Environment, Water and Natural Resources Agriculture, 10,100,000 5,050,000 382,185 7.57% 10,000,000 5,000,000 1,036,525 20.73% Livestock, Fisheries and Cooperative Development Health 353,500,000 176,750,000 112,542,180 63.67% 350,000,000 175,000,000 159,492,769 91.14% Youth 1,010,000 505,000 0 0.00% 1,000,000 500,000 0 0.00% Empowerment, Sports, Gender, Culture, Children and Social Services TOTAL 392,890,000 196,445,000 112,924,365 57.48% 389,000,000 194,500,000 162,124,301 83.35% Own Source Revenue Projections 2021/2022-2023/2024 Below is the breakdown of the Local revenue and AiA projections:- Local Source of Revenue Projections 2021/2022-2023/2024 a) Local Revenue Revenue Stream 2021/2022 2022/2023 2023/2024 Single Business Permit 114,635,000 115,781,350 116,939,164 House Stall 20,200,000 20,402,000 20,606,020 Market fees 30,300,000 30,603,000 30,909,030 Street and Bus Parking Fees 40,400,000 40,804,000 41,212,040 Cess 60,600,000 61,206,000 61,818,060 Land Rates and Plot Rents 197,960,000 199,939,600 201,938,996 17 Revenue Stream 2021/2022 2022/2023 2023/2024 Enforcement 1,515,000 1,530,150 1,545,452 Technical planning Fees 15,150,000 15,301,500 15,454,515 Administration Fees 1,010,000 1,020,100 1,030,301 Advert Fees 25,250,000 25,502,500 25,757,525 Slaughter House fees 3,030,000 3,060,300 3,090,903 Miscellaneous revenue 2,020,000 2,040,200 2,060,602 Stock fees 3,030,000 3,060,300 3,090,903 Water Charges 1,010,000 1,020,100 1,030,301 TOTAL 516,110,000 521,271,100 526,483,811 b) Appropriation in AiA by Departments Revenue Stream 2021/2022 2022/2023 2023/2024 Trade, Tourism, Investment 25,250,000 25,502,500 25,757,525 and Industrialization Lands, Environment, Water 3,030,000 3,060,300 3,090,903 and Natural Resources Agriculture, Livestock, 10,100,000 10,201,000 10,303,010 Fisheries and Cooperative Development Health 353,500,000 357,035,000 360,605,350 Youth Empowerment, Sports, 1,010,000 1,020,100 1,030,301 Gender, Culture, Children and Social Services TOTAL 392,890,000 396,818,900 400,787,089 IV FISCAL POLICY AND BUDGET FRAMEWORK The fiscal framework for the FY 2021/22 Budget is based on the County Government’s 18 policy priorities within the existing macroeconomic environment. The County Government is committed to implementing priority programmes contained in the County Integrated Development Plan (CIDP) 2018-2022 while taking into account the availability of resources during the period. Further, the framework prioritizes prudent fiscal policy as a commitment towards sound financial management practices as entrenched in the Public Finance Management Act, 2012. Sustainability, affordability and prioritization will guide programme/project identification and implementation. This will be achieved through spending that is directed towards the most critical needs of the county and is well utilized. There will also be increased focus on improvement of both efficiency and productivity of recurrent expenditure. The focus for development expenditure will seek to ensure equitable development while making provisions for any marginalized groups in the county. The large amount of expenditure required entails equivalent revenue being generated. This has necessitated the need to refocus efforts on key streams, broadening the tax collection base in order to increase revenue collection through automation of more revenue streams while continually sealing any existing leakages. 8. Prudent Fiscal Policy Fiscal policy will continue to support economic activity while undertaking the functions of county government within a context of sustainable public financing. Since the inception of the devolved government, the County Government has reoriented expenditure towards priority programs in Infrastructure, Health, Water, Wealth, Agriculture and Lands under the medium-term expenditure framework (MTEF). The county will continue prioritizing expenditure towards those priority programs that are in line with the County Integrated Development Plan (2018-2022). The critical programmes to be implemented are expected to accelerate economic activities and socio-economic development. 19 9. Observing Fiscal Responsibility Principles The fiscal decisions made in the present day by the County Government will have implications into the future. The Constitution 2010 and the Public Finance Management (PFM) Act, 2012 both stress on the need to make prudent policy decisions for both the present and future generations. Further, the PFM Act underscores the need to be guided by the public finance management principles that relate to transparency and accountability on financial matters. The County Government also undertakes to adhere to minimum ratio of development to recurrent expenditure of at least 30:70 over the medium term, as set out in the PFM Act. The Constitution, 2010 underscores the importance of public participation in decision making at the county level. This requirement on public participation in relation to determining key priority programmes/projects for implementation as well as in their implementation will be adhered to. The County government shall also involve the various stakeholders in determining fees and levies for services offered which are expected to be fair with the overall goal being to promote equitable development of the county. The need for improved service delivery and implementation of development programmes results in increased expenditure demands. This will require a corresponding increase in revenue base. The county plans to meet this through efficient collection methods, widening of revenue base, and applying reasonable revenue rates. It is therefore imperative to reform and modernize the revenue regimes to ensure stability of revenue effort, while at the same time continuing to restructure expenditure systems to ensure efficiency and create fiscal space required to fund priority programmes on sustainable basis. 10. Fiscal structural reforms Reforms in this area will focus on strengthening data collection/analysis and reviewing budget procedures to ensure budget formulation process is appropriately integrated with planning. The county will undertake a number of measures in improving revenue and expenditure performance. These include continued modernization of revenue administration infrastructure to help in effectively enforcing revenue collection in the County, continue with 20 expenditure management reforms to improve efficiency and reduce wastage in line with the PFM Act (2012) and embracing the Integrated Financial Management Information System (IFMIS) fully including E-Procurement in expenditure management to ensure proper controls of public fund. 11. 2021/2022 Budget Framework The 2021/2022 budget framework will target the County Government’s strategic objectives as outlined in the Annual Development Plan 2020 and County Integrated Development Plan (2018-2022). Public Private Partnerships (PPPs) will be encouraged in order to create fiscal space, which is obviously important for infrastructure development, where large gaps already remain on the Medium term Expenditure Framework (MTEF) will ensure proper coordination of policy, planning and budgeting in accordance with county development priorities. The expected share of development funds of the total expenditure will be 30.0 percent. Recurrent expenditure takes the lion share of 70.0 percent largely due to the county wage bill totaling Ksh. 3,171,540,294. Table 2: County Fiscal Projections 2021/22 -2023/24 Printed CARA CFSP Ceilings Projections Estimates (Approved Budget) 2020/21 2020/21 2021/2022 2022/2023 2023/2024 TOTAL REVENUE 6,464,660,318 6,211,458,318 7,062,908,864 7,380,819,702 7,714,338,082 Equitable Share Of 4,557,600,000 4,304,400,000 5,125,243,762 5,381,505,950 5,650,581,248 Revenue From National Government Conditional Grant To the 301,040,462 301,040,462 301,040,462 316,092,485 331,897,109 Level Five Hospital Conditional Allocation For 34,249,894 34,249,894 34,249,894 35,962,389 37,760,508 Development Of Youth Polytechnics Conditional Grant For 10,724,225 10,724,225 10,724,225 11,260,436 11,823,458 Compensation For User Fees Forgone Conditional Grant For 132,023,277 132,021,277 153,297,872 160,962,766 169,010,904 Leasing Of Medical Equipment Conditional Grant From 135,839,025 135,839,025 135,839,025 142,630,976 149,762,525 Road Maintenance Fuel Levy Fund 21 Printed CARA CFSP Ceilings Projections Estimates (Approved Budget) 2020/21 2020/21 2021/2022 2022/2023 2023/2024 Kenya Urban Support 119,892,100 119,892,100 119,892,100 Project (KUSP) Kenya Urban Support 8,800,000 8,800,000 8,800,000 Project (KUSP-UIG) Loans and Grants 384,183,435 384,183,435 453,821,524 476,512,600 500,338,230 Transforming Healthcare 112,736,973 112,736,973 112,736,973 118,373,822 124,292,513 Systems for Universal Care Project Agricultural and Rural 202,094,150 202,094,150 271,732,239 285,318,851 299,584,793 Inclusive Growth Project (NARIGP) Kenya Devolution Support 45,000,000 45,000,000 45,000,000 47,250,000 49,612,500 Programme (KDSP) - Level 1 Sweden- Agricultural 12,112,312 12,112,312 12,112,312 12,717,928 13,353,824 Sector Development Support Programme (ASDSP) Universal Healthcare in 12,240,000 12,240,000 12,240,000 12,852,000 13,494,600 Devolved System Program Local Sources 516,110,000 516,110,000 327,110,000 330,381,100 333,684,911 Appropriations In Aid 392,890,000 392,890,000 392,890,000 396,818,900 400,787,089 (AiA)- Ministerial Total Expenditure 6,464,658,318 7,062,908,864 7,380,819,702 7,714,338,082 Recurrent Expenditure 4,315,419,007 4,753,221,405 4,957,718,698 5,171,114,304 Personnel Emoluments 3,049,557,975 3,316,377,729 3,449,032,838 3,586,994,152 Operations & Maintenance 1,265,861,032 1,436,843,676 1,508,685,860 1,584,120,153 Development 2,149,239,311 2,309,687,459 2,423,101,004 2,543,223,778 12. Revenue Projections The estimated equitable share of revenue from the National Government is Ksh 5,125,243,762 while Loan and grants from development partners amount to Ksh. 453,821,524 which includes various programmes such as Transforming Healthcare Systems for Universal Care Project, National Agricultural and Rural Inclusive Growth Project (NARIGP), Kenya Devolution Support Programme (KDSP), Universal Healthcare in Devolved System Program (DANIDA), Agricultural Sector Development Support Programme (ASDSP). The Conditional grants from the national government amounting to Ksh. 153,297,872 are based 22 on the Budget Policy Statement, 2021. Further, an estimate of Ksh. 610,545,706 was included for conditional grants that were not captured in the Budget Policy Statement 2021. The 2021/2022 budget target for revenue collection inclusive of Appropriation-in-Aid (AiA) is expected to be Ksh. 720,000,000, which is 10.19 percent of the total county revenue. County revenue from local sources will be raised through levies, permits, rents, service charge and rates. To supplement the available revenue from Local sources, AiA targets will be assigned to the Ministries. The AiA targets under each Ministry are based on the resources allocated respectively and the available opportunities under each Ministry. 13. Expenditure Forecasts The key policy document guiding the County Government's funding allocation decisions is the County Integrated Development Plan, which provides the updated development priorities of the county. Planning is expected to be guided by the public consultative forums which also provided a list of project priorities. In 2021/22; the recurrent expenditure is projected to be Kshs. 4,753,221,405 while development stands at Kshs. 2,309,687,459 accounting for 67.3 percent and 32.7 percent of total expenditure respectively. The proportion of emoluments, operations and development expenditure as shown in Table 1 14. Recurrent Expenditure The total wage bill of Kshs. 3,316,377,729 accounts for 46.95 percent of the total budget while operations and maintenance costs amount to Kshs. 1,436,843,676 accounting for 20.34 percent. This indicates that the wage bill takes the big share of the total budget way above the recommended 35 percent in the PFM regulations (County Governments), 2015. Table 3: Recommended Personnel Emolument ceilings for FY 2021/22 23 Portfolio Budget Estimates CFSP Ceilings % Share 2020/21 2021/22 Office of The Governor 127,967,112 133,085,796 4.01% Finance & Economic Planning 51,513,117 53,573,642 1.62% Embu County Revenue Authority 3 2 , 3 7 3 , 4 3 5 0.98% - Education, Science & Technology 232,221,698 353,974,566 10.67% Health 1,603,019,428 1,667,140,205 50.27% Embu Level 5 Hospital - - 0.00% Infrastructure, Public Works, Housing & 25,549,035 26,570,996 0.80% Energy Trade, Tourism, Investment & 16,488,386 17,147,921 0.52% Industrialization Agriculture, Livestock, Fisheries & Co- 236,235,913 245,685,350 7.41% operative Development Lands, Physical Planning & Urban 60,429,385 62,846,560 1.90% Development, Housing, Water and Irrigation, Environment and Natural Resources Youth Empowerment and Sports 3,904,143 4,060,309 0.12% Gender, Children, Culture & Social Services 4,423,440 4,600,378 0.14% Public Service & Administration 374,852,001 389,846,081 11.76% County Public Service Board 24,653,753 25,639,903 0.77% County Assembly 288,300,564 299,832,587 9.04% Total 3,049,557,975 3,316,377,729 100.00% The Health department including Level 5 hospital takes the lion share of the personnel emoluments at Ksh. 1,667,140,205 which accounts for more than half of the emoluments at 52.57 percent. This amount is expected to increase in the near future as a result of construction/expansion of health facilities as well as new facilities at the level 5 hospital which require more staff. Under operations and maintenance expenditure, the County Assembly takes the lion share accounting for 22.39 percent of the operations budget. The health docket and Embu level 5 follow closely at 21.24 and 16.1 percent respectively. The Wards Equalization projects have been allocated Ksh. 100,000,000 towards Education Support Programme. Table 4: Recommended Operations ceilings for FY 2021/22 24 Portfolio Budget CFSP 2021/22 Estimates County Grants Total % 2020/21 Revenue Less Share Grants Office of The Governor 106,836,120 113,545,617 - 113,545,617 7.90 Finance & Economic Planning 90,382,960 50,502,521 45,000,000 95,502,521 6.65 Embu County Revenue Authority 25,814,910 30,000,000 - 30,000,000 2.09 Education, Science & Technology 64,025,864 42,616,505 25,336,351 67,952,856 4.73 Health 298,045,160 180,187,040 124,976,973 305,164,013 21.24 Embu Level 5 Hospital 222,088,539 231,264,740 - 231,264,740 16.10 Infrastructure, Public Works, Housing & 25,863,447 27,738,883 - 27,738,883 1.93 Energy Trade, Tourism, Investment & 6,593,656 10,352,556 - 10,352,556 0.72 Industrialization Agriculture, Livestock, Fisheries & Co- 29,625,030 21,487,788 13,711,140 35,198,928 2.45 operative Development Lands, Physical Planning & Urban 25,995,907 21,280,893 8,800,000 30,080,893 2.09 Development, Housing, Water and Irrigation, Environment and Natural Resources Youth Empowerment and Sports 3,934,849 11,883,192 - 11,883,192 0.83 Gender, Children, Culture & Social 3,623,102 10,650,000 10,650,000 0.74 Services Public Service & Administration 22,869,864 24,495,884 - 24,495,884 1.70 County Public Service Board 18,404,564 21,256,534 - 21,256,534 1.48 County Assembly 321,757,060 321,757,060 - 321,757,060 22.39 Ward Equalization Projects 100,000,000 100,000,000 6.96 Total 1,265,861,032 1,219,019,212 217,824,464 1,436,843,676 100 15. Development In line with the objective of allocating adequate resources towards development expenditure and the need to ensure completion of ongoing projects, the ceiling for development expenditure is Ksh. 2,309,687,459. Most of the funds are expected to support critical infrastructure as well as facilitate critical interventions to remove constraints hindering economic growth. The Wards Equalization projects have been allocated Ksh. 300,000,000 towards projects to be domiciled within various sectors. Adherence to Public Procurement and Disposal Act 2015 will help ensure value for money as well as transparency in all procurement. A breakdown of county development expenditure is highlighted in Table 4: Table 5: Development Sector Ceilings for the FY 2021/2022 25 Portfolio Budget CFSP 2020/21 Estimates County Grants Total % Share 2020/21 Revenue Less Grants Office of The Governor 0 0 0 0.00 Finance & Economic Planning 29,070,000 29,616,351 29,616,351 1.28 Embu County Revenue 0 10,000,000 10,000,000 0.43 Authority Education, Science & 47,998,030 40,849,830 8,913,543 49,763,373 2.15 Technology Health 179,747,979 83,500,000 100,000,000 183,500,000 7.94 Embu Level 5 Hospital 154,127,384 94,563,830 53,297,872 147,861,702 6.40 Infrastructure, Public Works, 1,137,320,879 495,638,582 135,839,025 631,477,607 27.34 Housing & Energy Trade, Tourism, Investment 43,995,449 73,505,000 0 73,505,000 3.18 & Industrialization Agriculture, Livestock, 229,420,534 181,911,721 270,133,411 452,045,132 19.57 Fisheries & Co-operative Development Lands, Physical Planning & 107,558,500 96,107,900 119,892,100 216,000,000 9.35 Urban Development, Housing, Water and Irrigation, Environment and Natural Resources Youth Empowerment and 33,349,758 60,367,539 0 60,367,539 2.61 Sports Gender, Children, Culture & 44,150,798 45,000,000 0 45,000,000 1.95 Social Services Public Service & 20,000,000 30,550,755 0 30,550,755 1.32 Administration County Public Service Board 0 0 - 0 0.00 County Assembly 122,500,000 80,000,000 0 80,000,000 3.46 Ward Equalization Projects 300,000,000 300,000,000 12.99 Total 2,149,239,311 1,621,611,508 688,075,951 2,309,687,459 100 16. Overall Deficit Financing It is in the interest of the government that county expenditure be limited to county estimates which should be commensurate with own source revenue, equitable share from the national government and conditional allocations from both the national government and development partners. Therefore, the county will not run into deficits while drawing budget because the budget is supported by prerequisite revenue. 26 V. COUNTY MEDIUM TERM EXPENDITURE FRAMEWORK The MTEF is annual, rolling three year-expenditure planning. It sets out the medium term expenditure priorities and budget constraints against which sector plans are developed and refined. Medium term strategic priorities are a statement of the organization’s direction. They offer a clear roadmap of where the county wants to be. The 2021/2022 -2023/2024 MTEF budget will build on the gains made so far. The County Fiscal strategy paper will cover the following key sector Priorities Details of Sector Priorities The medium term spending estimates for 2021/22- 2023/24 ensures continuity in resource allocation based on prioritized programs aligned to the Annual Development Plan. The total expenditure ceilings as well as the sector ceilings for the MTEF period 2021/22-23/24 are stipulated in Annex I and II respectively. INFRASTRUCTURE, PUBLIC WORKS, ENERGY AND TRANSPORT The goal of the sector is to facilitate provision, construction and maintenance of quality government buildings and other public works for sustainable socio-economic development. Infrastructural Sector is the enabler for sustained development of the county. During the current MTEF period, the sector's priorities will include: Improving efficiency and effectiveness of the infrastructure development process at all levels of planning and construction, Improvement of roads to bitumen Level, Maintenance of Existing Tarmac roads, Embu County Roads and other Civil Works; Murraming, Grading, Bush clearing and reshaping of the various roads, Routine maintenance of roads, Construction of bridges and drifts, Opening of New roads, Construction of parking slots, Installation of power transformers and power utilities and Energy Diversification. Health This sector plays a significant role in improvement of access and better health care for the citizens. The functions under this sector include county health facilities and pharmacies, ambulance services, promotion of primary health care, licensing and control of undertakings that sell food to the public. The county has made significant investments to construct new facilities, upgrade, renovate and equip existing facilities to provide comprehensive health care. During the MTEF the sector priories are: 27 Completion and Equipping of Health facilities, Completion and Equipping of Maternities, Purchase of Garbage Vehicles and Equipping of Physiotherapy The Level 5 hospital is critical in provision of broad health care within the region. The continued expansion of the hospital will broaden the scope of services offered. This has positive ramifications not only towards accessibility but also will contribute to the county revenue basket. The key priorities within the level 5 facilities are: Purchase and installation of equipment for molecular laboratory, Upgrading of electrical power house equipment, Purchase and installation of gymnasia, physiotherapy and occupational equipment, Purchase and installation of dental and medical equipment and Equipping of biomedical engineering workshop. It is paramount that there is a healthy and productive population that is capable to engage in productive activities which in turn translates to higher economic development and consequently better standards of living. Agriculture, Livestock, Fisheries and Cooperative Development This Sector is paramount towards ensuring food security, mobilizing domestic savings availing credit though cooperatives societies and revamping the livestock and fisheries sub-sector. Its key objective is to improve livelihoods of the citizens through promotion of sustainable management of land resource, competitive agriculture and value addition of agricultural produce. The sector is the backbone of the County's economic growth, employment creation and poverty reduction. It contributes about 80 percent of the County’s economic production and contains multiple linkages with other key sectors. The key priorities within the sector includes; continuous farmer training, crop development and management, agribusiness & information management, research, livestock improvement and disease control. Education, Science and Technology The sector objective is to enhance capacity for quality service delivery, ensure conducive learning environment, provide, promote and coordinate quality education, integration of science and technology, enhance access to quality education The sector priority is to upgrade and improve tertiary institutions, increase access to early childhood education through and equipping of up to date ECDE centers, construction & equipping of 28 Vocational training Centre, Provide capitation (subsidized tuition) for VTC TRAINEES and support the of needy students Trade, Tourism, Investment and Industrialization The key objective of this sector is to provide a trade friendly environment. This is by embracing policies and programs that optimize the economic, environmental and socio-cultural benefits for the trade and tourism sector thus contributing to sustainable growth and development of the county. Key priority will be the construction and improvement of markets around the county which will go a long way in improving trade in the county. The county Government will facilitate the provision of credit facilities to the small scale traders, providing training on entrepreneur and management skills to the already existing and potential traders. Tourist facilities will be established and proper marketing be done through elaborate and strategic signage across the county. Youth Empowerment, Gender, Children, Social Services and Culture This sector seeks to implement strategies that spur economic growth and addresses the social economic needs to the community. The sector will also seek to empower youth through skills development, talent harnessing and developing and maintaining sporting facilities. The sector intends to prioritize on gender and social development plans to empower community and support programme to create awareness on income generating businesses. Completion and the operationalization of the gender resource Centre is a priority as well as continuing with the men and women empowerment programmes with a key objective of training men and women on financial skills and investment. The sector also prioritizes establishment and management of children protection initiatives In sports, the sector prioritizes empowerment of the county youths through sports, identification and nurturing of talents. Finance and Economic Planning This sector plays a paramount role in planning, mobilization of financial resources and budget implementation in the county. The overall goal of the sector is to enhance the capacity for planning and policy management and coordinate the implementation of the Kenya Vision 2030, sustainable development goals and the big four agenda so as to make the county a competitive and prosperous county. The sector’s specific objectives include monitoring progress in implementation of CIDP and 29 other key programmes, sustaining and safeguarding of a transparent and accountable system for management of public finances. To enhance revenue, the sector will ensure proper maintenance Embu pay revenue management system. The Embu Revenue authority has been tasked with coming with measures to address any revenue leakages while seeking to also increase the overall revenue collection. Lands, Housing, Physical Planning, Urban Development, Water and Irrigation, Environment and Natural Resources The land department mission is to facilitate efficient land administration and management, access to adequate and affordable housing, social and physical infrastructure for sustainable County development. This is expected to be realized through the sectors key responsibility of ensuring efficient administration and sustainable management of the land resource in the county. The keys objectives of the sector includes improving of land management for sustainable development, produce and maintain plans of property boundaries in support of land registration and to ensure guarantee and security of land tenure. The lands department will prioritize to undertake the preparation of county spatial plan and Part Development Plan, installation and operationalization of the GIS system. The establishment of the Embu municipality Board which is also being supported by the World Bank under the KUSP is expected to also help address infrastructural challenges facing the municipal area. Water and Irrigation subsector plays a pivotal role in ensuring that every citizen lives in a clean and secure environment with adequate access to clean and safe water. Funding towards expanding water distribution networks continue being a priority so as to enable more households access clean water. Construction, rehabilitation and expansion of urban and rural water supply through drilling, rehabilitation and equipping of bore holes as well as de-silting of dams and water pans will continue being core in provision of domestic water. The key priorities are the expansion of existing water distribution networks for domestic and irrigation use, drilling & refurbishment of boreholes and construction of water treatment plant. 30 Office of the Governor The office of the Governor through the Executive Committee gives policy direction for implementation based on County and National legislations to the extent that the legislation so requires and to manage the functions of the County Administration and its departments. Funding over the 2021/22- 2023/2024 MTEF period will enable the office to provide key leadership and policy direction in the governance of the county; coordinate and supervise government affairs; promote public service integrity, ensure efficient and effective resources management and development for improved public service delivery. The sector links with all the sectors to enable efficient and effective service delivery. County Assembly The County Assembly plays the critical role of strengthening the democratic space, ensuring good governance in the county, oversight role over the County Executive and developing new legislations. The MTEF budget proposals for County Assembly are expected to be submitted directly to the County Assembly in line with the Constitution, in line with the Commission for Revenue Allocation (CRA) guidelines and directives on ceiling for financing County Assemblies operations. The sector ensures there is legislation & policies in place to guide other sectors. It main role is to oversee other sectors. County Public Service Board The County Public Service Board (CPSB) is an independent county board established by law and is in charge of handling all matters of human capital of the county. The sector goal is to empower the county public service to be professional, productive, ethical, effective and efficient in service delivery. The sector’s key objectives include ensuring effective and efficient running of the county affairs as per to the constitution and provide a suitable working environment for sector’s staff The sector prioritizes to put up a robust performance management system aimed to improve service delivery. Capacity development of county staff continues to be a major problem that the public service and administration portfolio seeks to look into. The portfolio intends to develop the capacity of staff through professional development and promotional training courses. Further, the sector will continue to offer support to sub-county offices as well as complete the construction of offices for sub-county and ward administrators. 31 Public Service, Administration and Devolution The public service, administration and devolution is the coordinating unit of the County Government programmes and activities. The department is made up of the following units; General Administration, legal unit, Information Communication & Technology, Public Communication, Human Resources and Payroll management, Enforcement, Disaster Risk Reduction Management, Transport and Fleet Management .The department is an enabling entity which coordinates, monitors implementation of the functions of the county government in all areas including at the grass root level, ensuring that the resources allocated are used prudently and to the benefit of the community. Further, the department coordinates public participation and engagement. The Human Resource unit is charged with the responsibility of ensuring that the right staff are sourced and deployed according to needs and ability .Continuous staff development is undertaken so as to maximize on staff output while ensuring personal career growth. The departmental liaison role, ensures proper engagement of partners and stakeholders across the board so as to strengthen partnerships and Inter-Governmental relationships especially during devolution conferences and other forums relevant to the County development. The department will also take lead role identification, mitigation and management of common and emerging incidences such as fires, floods, drowning, road traffic incidences and emerging pandemics. Using modern technology the department will provide an opportunity for the County to strategically place itself in the frontline towards digitalization of services which in turn enables communities to do business, having taken advantage of the creation of ICT hubs throughout the county. At the same time we will ensure proper implementation of the county laws by making sure they are followed and enforced as expected. 32 CONCLUSION The current economic environment calls for strict austerity measures and fiscal discipline in county expenditure. Macroeconomic stability will be critical to supporting growth in the medium term. Sound fiscal discipline will be key to the county’s resilience to ensure economic growth while ensuring that the benefits of growth are shared by all. Fiscal policy as shown here will support growth within a sustainable path of public spending. Recurrent expenditure as a proportion of total government expenditure will proportionately reduce while allowing development expenditure to rise. Austerity in county spending will help generate a pool of funds available for development initiatives in the county. Sound utilization of funds of county resources while improving on efficiency will also help to create room for critical interventions in the social sector. 33 Annex I: Total Expenditure Ceilings for the FY 2021/22 Portfolio Emoluments Operations Development Total Office of The Governor 133,085,796 113,545,617 0 246,631,413 Finance & Economic Planning 53,573,642 95,502,521 29,616,351 178,692,513 Embu County Revenue Authority 32,373,435 30,000,000 10,000,000 72,373,435 Education, Science & Technology 353,974,566 67,952,856 49,763,373 471,690,795 Health 1,667,140,205 305,164,013 183,500,000 2,155,804,218 Embu Level 5 Hospital 0 231,264,740 147,861,702 379,126,442 Infrastructure, Public Works, 26,570,996 Housing & Energy 27,738,883 631,477,607 685,787,486 Trade, Tourism, Investment & 17,147,921 Industrialization 10,352,556 73,505,000 101,005,477 Agriculture, Livestock, Fisheries & 245,685,350 Co-operative Development 35,198,928 452,045,132 732,929,409 Lands, Physical Planning & Urban 62,846,560 Development, Housing, Water and Irrigation, Environment and Natural Resources 30,080,893 216,000,000 308,927,454 Youth Empowerment and Sports 4,060,309 11,883,192 60,367,539 76,311,040 Gender, Children, Culture & Social 4,600,378 Services 10,650,000 45,000,000 60,250,378 Public Service & Administration 389,846,081 24,495,884 30,550,755 444,892,720 County Public Service Board 25,639,903 21,256,534 0 46,896,437 County Assembly 299,832,587 321,757,060 80,000,000 701,589,647 Ward Equalization Projects 0 100,000,000 300,000,000 400,000,000 Total 3,316,377,729 1,436,843,676 2,309,687,459 7,062,908,864 i Annex II: Total Expenditure Ceilings for the MTEF Period 2021/22 – 2023/24 Portfolio 2021/22 2022/23 2023/24 Office of The Governor 246,631,413 257,632,126 269,129,640 Finance & Economic Planning 178,692,513 187,064,849 195,847,689 Embu County Revenue Authority 72,373,435 75,659,407 79,101,224 Education, Science & Technology 471,690,795 491,690,972 512,571,944 Health 2,155,804,218 2,246,758,504 2,341,676,159 Embu Level 5 Hospital 379,126,442 397,950,194 417,781,619 Infrastructure, Public Works, Housing & Energy 685,787,486 719,244,978 754,648,660 Trade, Tourism, Investment & Industrialization 101,005,477 105,818,368 110,898,096 Agriculture, Livestock, Fisheries & Co-operative 732,929,409 766,713,730 802,292,255 Development Lands, Physical Planning & Urban Development, 308,927,454 323,551,699 338,979,142 Housing, Water and Irrigation, Environment and Natural Resources Youth Empowerment and Sports 76,311,040 63,909,727 67,042,874 Gender, Children, Culture & Social Services 60,250,378 79,298,684 83,188,794 Public Service & Administration 444,892,720 463,211,504 482,304,026 County Public Service Board 46,896,437 48,984,860 51,167,448 County Assembly 701,589,647 733,599,076 767,125,017 Ward Equalization Projects 400,000,000 419,731,025 440,583,496 Total 7,062,908,864 7,380,819,702 7,714,338,083 ii Annex III: Sector Ceilings for the MTEF Period 2021/22 – 2023/24 Sector 2021/22 2022/23 2023/24 Office of the Governor 246,631,413 257,632,126 269,129,640 Operations and Maintenance 113,545,617 119,222,897 125,184,042 Emoluments 133,085,796 138,409,228 143,945,597 Development - - - Finance and Economic Planning 178,692,513 187,064,849 195,847,689 Operations and Maintenance 95,502,521 100,277,647 105,291,529 Emoluments 53,573,642 55,716,587 57,945,251 Development 29,616,351 31,070,615 32,610,909 Embu Revenue Authority 72,373,435 75,659,407 79,101,224 Operations and Maintenance 30,000,000 31,500,000 33,075,000 Emoluments 32,373,435 33,668,373 35,015,107 Development 10,000,000 10,491,034 11,011,117 Education, Science & Technology 471,690,795 491,690,972 512,571,944 Operations and Maintenance 67,952,856 71,350,499 74,918,024 Emoluments 353,974,566 368,133,549 382,858,890 Development 49,763,373 52,206,925 54,795,030 Health 2,155,804,218 2,246,758,504 2,341,676,159 Operations and Maintenance 305,164,013 320,422,214 336,443,324 Emoluments 1,667,140,205 1,733,825,813 1,803,178,846 Development 183,500,000 192,510,477 202,053,988 Infrastructure, Public Works, Housing and 685,787,486 719,244,978 754,648,660 Energy Operations and Maintenance 27,738,883 29,125,827 30,582,118 Emoluments 26,570,996 27,633,836 28,739,190 Development 631,477,607 662,485,315 695,327,352 Trade, Tourism, Investment and Industrialization 101,005,477 105,818,368 110,898,096 Operations and Maintenance 10,352,556 10,870,183 11,413,693 Emoluments 17,147,921 17,833,838 18,547,192 Development 73,505,000 77,114,347 80,937,212 Agriculture, Livestock, Fisheries & Co-operative 732,929,409 766,713,730 802,292,255 Development Operations and Maintenance 35,198,928 36,958,874 38,806,818 Emoluments 245,685,350 255,512,764 265,733,274 Development 452,045,132 474,242,092 497,752,163 Lands, Physical Planning & Urban Development, 323,551,699 338,979,142 Housing, Water and Irrigation, Environment and 308,927,454 Natural Resources Operations and Maintenance 30,080,893 31,584,938 33,164,185 Emoluments 62,846,560 65,360,423 67,974,840 iii Sector 2021/22 2022/23 2023/24 Development 216,000,000 226,606,338 237,840,117 Youth Empowwerment and Sports 60,250,378 79,298,684 83,188,794 Operations and Maintenance 10,650,000 11,182,500 11,741,625 Emoluments 4,600,378 4,784,393 4,975,768 Development 45,000,000 63,331,791 66,471,401 Gender, Women, Children, Culture and Social 76,311,040 63,909,727 67,042,874 Services Operations and Maintenance 11,883,192 12,477,352 13,101,219 Emoluments 4,060,309 4,222,721 4,391,630 Development 60,367,539 47,209,654 49,550,024 Public Service & Administration 444,892,720 463,211,504 482,304,026 Operations and Maintenance 24,495,884 25,720,679 27,006,713 Emoluments 389,846,081 405,439,924 421,657,521 Development 30,550,755 32,050,901 33,639,792 County Public Service Board 46,896,437 48,984,860 51,167,448 Operations and Maintenance 21,256,534 22,319,360 23,435,329 Emoluments 25,639,903 26,665,499 27,732,119 Development - - - County Assembly 701,589,647 733,599,076 767,125,017 Operations and Maintenance 321,757,060 337,844,913 354,737,159 Emoluments 299,832,587 311,825,890 324,298,926 Development 80,000,000 83,928,273 88,088,932 Level 5 Hospital 379,126,442 397,950,194 417,781,619 Operations and Maintenance 231,264,740 242,827,977 254,969,376 Emoluments - - - Development 147,861,702 155,122,217 162,812,243 Ward Equalization Projects 400,000,000 419,731,025 440,583,496 Operations and Maintenance 100,000,000 105,000,000 110,250,000 Emoluments - - - Development 300,000,000 314,731,025 330,333,496 TOTAL 7,062,908,864 7,380,819,702 7,714,338,083 Operations and Maintenance 1,436,843,676 1,508,685,860 1,584,120,153 Emoluments 3,316,377,729 3,449,032,838 3,586,994,152 Development 2,309,687,459 2,423,101,004 2,543,223,778 iv