COUNTY GOVERNMENT OF ISIOLO 2023 COUNTY FISCAL STRATEGY PAPER Equitable and Prosperous County FEBRUARY 2023 © County Fiscal Strategy Paper (CFSP) 2023 To obtain copies of the CFSP, please contact: County Department of Economic Planning, Budgeting & Statistics P.O. Box 36-6300 ISIOLO, KENYA ccoeconomicplanning.statistics@gmail.com The document is also available on the website at: https://www.isiolo.go.ke/ i FOREWORD The 2023 County Fiscal Strategy Paper (CFSP), the first to be prepared under the new Administration- which is led by H.E. Abdi Ibrahim Hassan. It sets out the Administration’s priority programs, policies and reforms to be implemented in the Medium-Term Expenditure Framework (MTEF). The 2023 CFSP comes at a time when the County Government is finalizing the preparation of the third County integrated Development Plan (CIDP 2023-2027). The CFSP is framed against a backdrop of global economic slowdown underpinned by the ongoing Russia-Ukraine conflict, elevated global inflation, and the lingering effects of the COVID-19 pandemic and climate change related supply chain disruptions. As the effects of COVID-19 pandemic started to fade away, the Kenyan economy bounced back recording a GDP growth rate of 7.5 percent in 2021. However, the momentum has been disrupted again by the Russia-Ukraine conflict that has disrupted global trade with increased fuel, fertilizer and food prices. For the first time in five years the inflation rate in Kenya is above the Government target range mainly driven by supply side constraints occasioned by external shocks and climate related food and energy prices. Aside from these challenges, the Kenyan economy continues to be confronted by various constraints such as: recurrent drought affecting agricultural productivity; declining manufacturing productivity; skewed access to finance for business and development; rigidities in business regulatory framework; weak governance; and fiscal risks including pension’s liabilities, stalled public projects, payment arrears; and high debt service that has hindered the economy from achieving its full potential. The Fiscal Strategy Paper outlines the Medium-Term Fiscal Framework, which offers mechanisms for entrenching sustainable growth and development for efficient service delivery in Isiolo County. This calls for openness, transparency, accountability, responsiveness, and abiding by the rule of law to facilitate fiscal discipline and maintain macroeconomic stability. The County Government of Isiolo will focus on implementing priority areas identified in 2023-2027County Integrated Development Plan (CIDP) and 2023 Annual Development Plan (ADP) that includes: Enhancing County Food Security; Investing in Quality, Affordable and Accessible Health Services; Increase Water Reticulation; Expanding and maintaining the road network;Investing in Education and Vocational Training; Good Governance; and Urban Development. This Paper articulates Economic Policies and Structural Reforms as well as sector-based expenditure Programmes that the County intends to implement in order to achieve the broad goal of its development agenda. HON. ABDULLAHI BANTICHA COUNTY EXECUTIVE COMMITTEE MEMBER, FINANCE AND ECONOMIC PLANNING ii ACKNOWLEDGEMENT The 2023 CFSP is prepared in compliance with the provisions of the Public Finance Management Act, 2012. It outlines the current state of the economy, provides macro- fiscal outlook over the medium term and specifies the set strategic priorities and policy goals together with a summary of Government spending plans as a basis for the FY 2023/24 budget. As we finalize the budget for the FY 2022/23 and the medium term, I wish to emphasize that we are operating under tight resource constraints amidst significant revenue shortfalls occasioned by declining economic activities. On the other hand, the Government is confronted with significant expenditure demands. This called for proper prioritization to ensure focus is on critical expenditures with the highest positive impact on the well-being of the people of Isiolo. In this regard, the County Government will continue to prudently manage the use of public resources over the 2023/24-2025/26 Medium Term Expenditure Framework (MTEF). Funding priority is accorded to completion of ongoing projects, which are supportive to accelerate inclusive growth and development. The preparation of the 2023 CFSP was a collaborative effort among various departments and we are grateful for their timely inputs. We are also grateful to the core team from the Planning and Budget Department who worked tirelessly to put together inputs from different departments and stakeholders and ensured the document was produced in time while maintaining high quality standards. MR. GABRIEL LEKALKULI ELIAS COUNTY CHIEF OFFICER ECONOMIC PLANNING, BUDGETING & STATISTICS iii ABBREVIATIONS AND ACRONYMS A.I.A Appropriation in Aid AIDS Acquired Immunodeficiency Syndrome CECM County Executive Committee Member CFSP County Fiscal Strategy Paper CIDP County Integrated Development Plan CRA Commission on Revenue Allocation DANIDA Danish International Development Agency ECD Early Childhood Development FY Financial Year GDP Gross Domestic Product HIV Human Immunodeficiency Virus ICT Information Communication Technology IFMIS Integrated Financial Management Information System Ksh Kenyan Shilling LAPSSET Lamu Port and South Sudan-Ethiopia Transport MTEF Medium Term Expenditure Framework MTP Medium Term Plan PAYE Pay As You Earn PFM Public Finance Management PPP Public Private Partnership SBP Single Business Permit VAT Value Added Tax iv TABLE OF CONTENT FOREWORD ............................................................................................................................... ii ACKNOWLEDGEMENT .............................................................................................................. iii ABBREVIATIONS AND ACRONYMS .......................................................................................... iv TABLE OF CONTENT .................................................................................................................. v LIST OF TABLES ....................................................................................................................... vii LIST OF FIGURES .................................................................................................................... viii CHAPTER ONE ........................................................................................................................... 1 INTRODUCTION ......................................................................................................................... 1 1.1 Overview ....................................................................................................................................... 1 1.2 Legal Basis for County Fiscal Strategy Paper ................................................................................. 1 1.2.1 Constitution of Kenya, 2010 ................................................................................................ 2 1.2.2 Public Finance Management (PFM) Act, 2012 ................................................................... 2 1.3 Principles of Public Finance and Fiscal Responsibility Principles .................................................. 3 1.3.1 Principles of Public Finance ................................................................................................ 3 1.3.2Fiscal Responsibility Principles ........................................................................................... 3 1.4 Budgeting Approach ..................................................................................................................... 4 1.5 CFSP Preparation Methodology .................................................................................................... 5 CHAPTER TWO .......................................................................................................................... 6 Overview ............................................................................................................................................. 6 2.1.1 Recent Economic Developments and Outlook ............................................................ 6 2.1.2 National Economic Overview ....................................................................................... 7 2.2 County Economic and Fiscal Overview ....................................................................................... 12 2.2.1 County Economic Overview .............................................................................................. 12 2.2.2 County Fiscal Overview ..................................................................................................... 12 2.2.3 County Expenditure Analysis ..................................................................................... 18 CHAPTER THREE ..................................................................................................................... 21 FORWARD ECONOMIC AND FISCAL DEVELOPMENTS ........................................................... 21 Economic Outlook ............................................................................................................................. 21 National Forward Economic and Fiscal Development ...................................................................... 21 3.3 County Forward Economic and Fiscal Development .................................................................. 22 3.3.1 County Fiscal Overview ..................................................................................................... 22 CHAPTER FOUR ....................................................................................................................... 23 STRATEGIC PRIORITIES AND INTERVENTIONS .................................................................... 23 4.1 Overview ..................................................................................................................................... 23 4.1.1 Livestock Management and Crop Productivity ................................................................ 23 v CHAPTER FIVE ......................................................................................................................... 29 FISCAL POLICY AND BUDGET FRAMEWORK ......................................................................... 29 County Fiscal Policy ........................................................................................................................... 29 5.2 County Fiscal Framework ............................................................................................................ 30 5.2.1 Observing Fiscal Responsibility Principles ...................................................................... 30 5.2.2 Fiscal and Public Financial Management Reforms .......................................................... 31 5.3 Budget Framework for 2023/24 ................................................................................................. 31 5.3.1 Revenue Forecasts ............................................................................................................. 31 5.3.2 Expenditure Forecasts ................................................................................................ 32 5.4 Risk Management ....................................................................................................................... 33 CHAPTER SIX ........................................................................................................................... 35 MEDIUM TERM EXPENDITURE FRAMEWORK ....................................................................... 35 Overview ........................................................................................................................................... 35 Resource Envelope ............................................................................................................................ 35 Proposed Resource Allocation Prioritization Criteria ....................................................................... 37 6.4 Overall Spending Priorities .......................................................................................................... 37 6.5 Baseline Ceilings .......................................................................................................................... 37 Medium Term Expenditure Ceilings ................................................................................................. 41 CHAPTER SEVEN ......................................................................................................................... 43 CONCLUSION ............................................................................................................................. 43 vi LIST OF TABLES Table 1: Departmental Programmes ........................................................................................................................ 4 Table 2: 2022/23 Supplementary 1 Expected Revenue ................................................................................ 13 Table 3: Direct Transfers from National Government ................................................................................... 14 Table 4: Local Revenue Collection Performance in the First half year of FY 2022/23 ..................... 15 Table 5: Half year OSR performance FY 2013/14 to FY 2022/23 ............................................................ 16 Table 6: Comparison of Local Revenue Collection Performance for the First half of FY 2021/22 and 2022/23 .................................................................................................................................................................... 17 Table 7: Departmental Recurrent Expenditure Analysis for the first half of the FY 2022/23 ...... 18 Table 8: Departmental Development Expenditure Analysis for the first half of the FY 2022/23 20 Table 9: Summary of Revenue Projections for FY 2023/24 ........................................................................ 22 Table 10: Departmental Recurrent Expenditure Forecast for FY 2023/24 to 2025/26 ................. 32 Table 11: Departmental Development Expenditure Forecast for FY 2023/24 to 2025/26........... 33 Table 12: Risk Management over the Medium Term Period ....................................................................... 34 Table 13: Resource Envelope for FY 2023/24 .................................................................................................. 36 Table 14: Summary Basis for Setting of Ceilings Estimates ......................................................................... 38 Table 15: Medium Term Expenditure Ceilings. ................................................................................................. 42 vii LIST OF FIGURES Figure 1: Half Year Local Revenue Performance from FY 2013/14 to FY 2019/20 .......................... 16 viii About the County Fiscal Strategy Paper The County Fiscal Strategy Paper (CFSP) is a Government policy document that sets out the broad strategic priorities and policy goals to guide the County Governments in preparing their budgets for the subsequent financial year and over the medium term. In the document, adherence to the fiscal responsibility principles demonstrates prudent and transparent management of public resources in line with the Constitution and the Public Finance Management (PFM) Act, 2012. The CFSP is organized into seven chapters detailed as follows. Chapter 1: Gives an introduction on the various laws governing the preparation of the CFSP, plus the fiscal responsibility principles governing the budgeting process. Chapter 2: It provides an overview of the recent economic development and the macroeconomic outlook covering the national scene. Chapter 3: Outlines the forward economic and fiscal policies and the budget framework for the county. Chapter 4: Gives an analysis of strategic priorities and interventions. It also gives an analysis of the key priority sectors and interventions to be implemented. Chapter 5: Provides fiscal policy, budget framework and outlines the fiscal framework that is supportive of growth over the medium term period. Chapter 6: Presents the resource envelope and spending priorities of the proposed MTEF budget for the financial year 2023/24 and the medium term. It further provides the proposed sector ceilings and the baseline ceilings. Chapter 7: Provides a summarized Conclusion of the 2023 County Fiscal Strategy Paper. ix CHAPTER ONE INTRODUCTION 1.1 Overview 1 The preparation of the County Fiscal Strategy Paper (CFSP) is a requirement of Section 117 of the Public Finance Management (PFM) Act, 2012 and thus plays an integral part in the budget making process. It specifies the Broad Strategic Priorities and policy goals and guides the County Government in preparing its budget for the coming financial year and over the medium term period. 2 The CFSP 2023 forms the basis for implementation of the third-generation County Integrated Development Plan (CIDP 2023-2027). This Paper has, therefore, been formulated by adopting the priority areas as outlined in the draft Annual Development Plan( ADP), 2023 namely: i. Enhancing food security, sustainability of livestock based livelihoods and commercializing of livestock and crop production ii. Investment in Infrastructure development and expansion i.e. Roads, Water Supply, Market development iii. Investing in quality, affordable and accessible Health Services (i.e. preventative, curative and rehabilitative health care services). iv. Investing in modern urban infrastructure and sustainable land management for socio economic development v. Investing in Education, focusing on construction of more ECDE structures and equipping of youth polytechnics as well as social development of the communities through social programs. vi. Promotion of Tourism, trade and industrial development for a rapidly industrializing economy. vii. Enhancing governance, transparency and accountability in the delivery of services. viii. Investment in conflict resolutions by promoting initiatives for peaceful and cohesive society where all have access to equitable share of resources; 1.2 Legal Basis for County Fiscal Strategy Paper 3 The preparation of the CFSP is anchored in the Constitution of Kenya, 2010; and, PFM Act, 2012. 1 | P a g e 1.2.1 Constitution of Kenya, 2010 4 Article 220 (1) states that budgets of the National and County Governments shall contain: - a) Estimates of revenue and expenditure, differentiating between recurrent and development expenditure. b) Proposals for financing any anticipated deficit for the period to which they apply; and c) Proposals regarding borrowing and other forms of public debt during the following year. Sub-article (2) National legislation shall prescribe – a) The structure of the development plans and budgets of counties. b) When the plans and budgets of the Counties shall be tabled in the county assemblies; and c) The form and manner of consultation between the National Government and County Governments in the process of preparing plans and budgets. 1.2.2 Public Finance Management (PFM) Act, 2012 5 The County Fiscal Strategy Paper is prepared in accordance with section 117 of the Public Finance Management Act, 2012 which states that: a) The County Treasury shall prepare and submit to the County Executive Committee a County Fiscal Strategy Paper (CFSP) for approval and the County Treasury shall submit the approved Fiscal Strategy Paper to the county assembly, by the 28th February of each year b) The County Treasury shall align its County Fiscal Strategy Paper with the National objectives in the Budget Policy Statement. c) 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. d) The County Treasury shall include in its Fiscal Strategy Paper, the Financial Borrowing for the financial year and over the Medium Term. e) In preparing the Fiscal Strategy Paper, the County Treasury shall seek and take into account views of: i. The Commission on Revenue Allocation (CRA). ii. The Public. 2 | P a g e iii. Any interested persons or groups; and iv. Any other forum that is established by legislation. f) 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. g) The County Treasury shall consider any recommendations made by the County Assembly in finalizing the budget proposal for the financial year concerned; and h) The County Treasury shall publish and publicize the County Fiscal Strategy Paper within seven days after it has been submitted to the County Assembly. 1.3 Principles of Public Finance and Fiscal Responsibility Principles 1.3.1 Principles of Public Finance 6 Article 201 of the Kenyan Constitution, 2010 sets out the following principles of public finance: a) There shall be openness and accountability, including public participation in financial matters. b) The public finance system shall promote an equitable society, in particular- i. The burden of taxation shall be shared fairly. ii. Revenue raised nationally shall be shared equitably among national and county governments; and iii. Expenditure shall promote the equitable development of the country, including by making special provision for marginalized groups and areas. c) The burdens and benefits of the use of resources and public borrowing shall be shared equitably between present and future generations. d) Public money shall be used in a prudent and responsible way; and e) Financial management shall be responsible, and fiscal reporting shall be clear. 1.3.2Fiscal Responsibility Principles 7 The Public Finance Management (PFM) Act, 2012 sets out the following fiscal responsibility principles to ensure prudence and transparency in the management of public resources: a) The County Government’s recurrent expenditure shall not exceed the County government’s Total Revenue. b) Over the Medium Term, a minimum of 30 percent of the County government’s budget shall be allocated to the Development expenditure. c) The County Governments' expenditure on wages and benefits for its public officers shall not exceed a percentage of the County government's total revenue 3 | P a g e as prescribed by the Executive Committee Member for Finance in regulations and approved by County Assembly and in line with the PFM act. d) Over the Medium Term, the government's borrowing shall be used only for the purpose of financing development expenditure and not for recurrent expenditure. e) The County debt shall be maintained at sustainable level as approved by County Assembly. f) The fiscal risks shall be maintained 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. 1.4 Budgeting Approach 8 The formulation of the CFSP 2023 takes into consideration the classification of devolved functions as a basis for revenue sharing as illustrated in Table 1 below. Table 1: Departmental Programmes Code Department Program 3511000000 County Assembly Services 0721003510 P21 County Assembly infrastructure, policy and service support 0722003510 P22 Legislative and oversight 0724003510 P24 Administration and support services 3512000000 County Executive 0713003510 P13 County Governance and Coordination Affairs 0716003510 P16 County Devolved Administration Affairs 0701003510 P1 County Governance and Coordination Affairs Deputy governor 0708003510 P8 Governors Delivery Unit 0723003510 P23 County Public Service 3513000000 Finance, Economic Planning, 0709003510 P9 Administration and support Cohesion Special Programme services 0710003510 P10 Public financial management 0711003510 P11 Economic Planning and Coordination Services 0712003510 P12 Cohesion and Peace Building 0725003510 P25 Special programmes 0726003510 P26 KDSP (Kenya Devolution Support Programme) Conditional Grant 3514000000 Lands, Urban Planning, Roads, 0107003510 P7 Housing and urban development Infrastructure, Housing, And Public and public works Works 0109003510 P9 Land Survey and land use planning 0204003510 P4 Road improvement, accessibility, Logistic and connectivity 3515000000 Agriculture, Livestock and Fisheries 0101003510 P1 Livestock Resource Management 4 | P a g e Code Department Program Development and Development 0102003510 P2 Fisheries Development and Management 0103003510 P3 Administrative, planning, and support services P4 Crop Development and Management 0105003510 P5 Veterinary Services 3518000000 Education, Vocational Training, 0501003510 P1 General Administration, Planning Youth Sports Culture Gender and and Support Services. Social Services 0502003510 P2 Early Childhood Development 0503003510 P3 Technical and Vocational Training 0504003510 P4 Sports development and Youth Empowerment 0505003510 P5 Culture and Social Services 3519000000 Tourism, Wildlife Trade 0719003510 P19 Public Service Management and Cooperatives Enterprise Transformation Development, Administration and 0301003510 P1 Trade development and Public Service Management promotion 0303003510 P3 Co-Operative Development 0304003510 P4 Tourism Development Promotion 3521000000 Water, Sanitation, Energy, 1001003510 P1 Administration, Planning and Environment and Natural Resource Support services 1002003510 P2 Water supply and storage services 1003003510 P3 Environment and Natural resources 3522000000 Health Services 0401003510 P1 Preventive and Promotive services 0402003510 P2 Administration and planning Support services 0403003510 P3 Curative Health Services 3524000000 Municipal Administration 0206003510 P6 KUSP 0207003510 P7 Municipal Administration 1.5 CFSP Preparation Methodology 9 Article 118 (1) (b) and 196 (b) of the Constitution of Kenya, 2010 provides that the public should be involved in the budget making process through public participation. In this respect, the county sent out an advertisement requesting for memorandums and inputs from the public; from which the county residents gave their inputs and contributions on their preferred priorities areas for development. 5 | P a g e CHAPTER TWO RECENT ECONOMIC AND MEDIUM TERM OUTLOOK Overview 10 The Kenyan economy continued to expand in 2022, albeit at a slower pace than the 7.5 percent recorded in 2021. Real GDP is expected to grow by 5.5 percent in 2022 supported by the services sector despite subdued performance in agriculture and weaker global growth. The economy is projected to rebound to 6.1 percent in 2023, reinforced by the Government’s development agenda geared towards economic turnaround and inclusive growth. 11 The coordination between monetary and fiscal policies continued to support macroeconomic stability with interest rates remaining relatively stable. Year-on- year overall inflation rate declined for the second consecutive month in December 2022. Inflation rate eased to 9.1 percent in December 2022 from 9.5 percent in November 2022 due to a decline in food prices with the favourable rains and declining international prices of edible oils. However, this inflation rate was higher than the 5.7 percent recorded in December 2021. 12 The external sector has remained stable despite the tight global financial conditions attributed to strengthening US Dollar and uncertainties regarding the ongoing Russian-Ukraine conflict. Due to the strong dollar, the exchange rate to the Kenya shilling like all world currencies has weakened but strengthened against other major international currencies. The current account deficit was generally stable at 5.2 percent of GDP in the 12 months to November 2022 compared to 5.4 percent of GDP in November 2021 on account of improved receipts from service exports and resilient remittances. The official foreign exchange reserves at 4.2 months of import cover in November 2022 continues to provide adequate buffer against short term shocks in the foreign exchange market. 13 The fiscal policy continues to pursue growth friendly fiscal consolidation to preserve debt sustainability. This will be achieved through enhancing revenue collection and curtailing non-core expenditures while prioritizing high impact social and investment expenditure. As such fiscal deficit is projected to decline from 5.8 percent of GDP in FY 2022/23 to 4.3 percent of GDP in FY 2023/24 2.1.1 Recent Economic Developments and Outlook Global and Regional Economic Developments 14 Global economic outlook has become more uncertain - reflecting the impact of the ongoing Russia-Ukraine conflict, elevated global inflation, lingering effects of COVID- 19 pandemic, and persistent supply chain disruptions. Global growth is expected to 6 | P a g e slow down to 3.2 percent in 2022 and is projected to slow down to 2.7 percent in 2023 from the earlier forecast of 2.9 percent. The USA economy is projected to slow down to 1.0 percent in 2023 from 1.6 percent in 2022, Euro Area economies will slow down to 0.5 percent from 3.1 percent in 2022. China economy is projected to improve to 4.4 percent from 3.2 percent in 2022 15 In the sub-Saharan Africa region, growth is projected at 3.7 percent in 2023 from a growth of 3.6 percent in 2022. This outlook is weaker than the growth of 4.7 percent in 2021 reflecting lower trading partner growth, tighter financial and monetary conditions, and a negative shift in the commodity terms of trade. 2.1.2 National Economic Overview 16 The Kenyan economy demonstrated remarkable resilience and recovery from COVID-19 shock due to the diversified nature of the economy and the proactive measures by the Government to support businesses. The economy expanded by 7.5 percent in 2021, a much stronger level from a contraction of 0.3 percent in 2020 17 The growth momentum continued in the first three quarters of 2022 averaging 5.5 percent despite subdued performance in agriculture and weaker global growth. The economy grew by 6.7 percent in the first quarter and 5.2 percent in the second quarter compared to a growth of 2.7 percent and 11.0 percent in similar quarters in 2021 18 In the third quarter of 2022, the economy grew by 4.7 percent compared to a growth of 9.3 percent in the corresponding quarter of 2021. Most sectors posted slower growths owing to the significantly high growth rates recorded in the third quarter of 2021 that signified recovery from the impact of the COVID-19 pandemic. The growth in the third quarter of 2022 was mainly supported by the service sectors particularly Accommodation and Food Service activities, Wholesale and retail trade, Professional, Administrative and Support services, Education and Financial and Insurance activities. The growth was however slowed by declines in activities of the Agriculture, Forestry and Fishing, and Mining and Quarrying sectors 19 The agriculture sector recorded a contraction of 0.6 percent in the third quarter of 2022 compared to a growth of 0.6 percent recorded in the corresponding quarter of 2021. The slowdown in performance of the sector was mainly attributed to unfavorable weather conditions that prevailed in first three quarters of 2022. The decline was reflected in the decline in vegetable exports and milk intake by processors. The sector’s performance was cushioned from a steeper contraction by improved production in fruits, coffee and cane. 20 The performance of the industry sector slowed down to a growth of 3.4 percent in the third quarter of 2022 compared to a growth of 8.3 percent in the same period in 2021. This was mainly on account of normalization of activities in the manufacturing sub-sector after the strong recovery in 2021. Manufacturing sub- sector expanded by 2.4 percent in the third quarter of 2022 compared to 10.2 percent growth recorded in the same period of 2021. The growth in the industry sector was supported by positive growths in Electricity and Water Supply sub- sector and construction sub-sector which grew by 4.7 percent and 4.3 percent, 7 | P a g e respectively. 21 The activities in the services sector normalized and remained strong in the third quarter of 2022 after a strong recovery in 2021 from the effects of COVID- pandemic. The sector growth slowed down to 6.1 percent in the third quarter of 2022 compared to a growth of 11.4 percent in the third quarter of 2021. This performance was largely characterized by substantial growths in accommodation and food services, wholesale and retail trade, professional, administrative and support services and education sub-sectors Inflation rate: 22 The year-on-year inflation rate eased for the second consecutive month in December 2022 but was still above the 7.5 percent upper bound target. Inflation rate eased to 9.1 percent in December 2022 from 9.5 percent in November 2022 due to a decline in food prices as a result of favorable rains and declining international prices of edible oils. However, this inflation rate was higher than the 5.7 percent recorded in December 2021. Overall annual average inflation increased to 7.6 percent in December 2022 compared to the 6.1 percent recorded in December 2021. 23 Kenya shilling exchange rate: The foreign exchange market has largely remained stable despite the tight global financial conditions attributed to strengthening US Dollar and uncertainties regarding the ongoing Russian-Ukraine conflict. Due to the strong dollar, the exchange rate to the Kenya shilling like all world currencies has weakened to exchange at Ksh 122.9 in December 2022 compared to Ksh 112.9 in December 2021. Against the Euro, the Kenya shilling also weakened to Ksh 130.0 from Ksh 127.6 over the same period. The Kenyan Shilling strengthened against the Sterling Pound to Ksh 149.8 in December 2022 from Ksh 150.2 in December 2021. 24 Interest rates: Monetary policy stance remains tight to anchor inflation expectations due to the sustained inflationary pressures, the elevated global risks and their potential impact on the domestic economy. In this regard, the Central Bank Rate was raised from 8.25 percent to 8.75 percent in November 2022 25 The interbank rate remained stable at 5.4 percent in December 2022 compared to 5.0 percent in December 2021 while the Treasury bills rates increased in December 2022 due to tight liquidity conditions. The 91-day Treasury Bills rate was at 9.4 percent in December 2022 compared to 7.3 percent in December 2021 26 Commercial banks’ lending rates remained relatively stable in October 2022 supported by the prevailing monetary policy stance during the period. The average lending rate was at 12.4 percent in October 2022 from 12.1 percent in October 2021 while the average deposit rate increased to 7.0 percent from 6.4 percent over the same period. Consequently, the average interest rate spread declined to 5.4 percent in October 2022 from 5.7 percent in October 2021 27 Money and Credit: Broad money supply, M3, grew by 7.2 percent in the year to December 2022 compared to a growth of 6.1 percent in the year to December 8 | P a g e 2021. The growth in December 2022 was mainly due to an increase in domestic credit particularly net lending to the private sector. This growth was however curtailed by a decline in the Net Foreign Assets (NFA). 28 Net Foreign Assets (NFA) of the banking system in the year to December 2022 contracted by 51.9 percent, compared to a contraction of 21.0 percent in the year to December 2021. The decline in NFA partly reflected a reduction in reserves at the Central Bank due to scheduled debt service, and the increase in commercial bank’s borrowing from foreign sources. 29 Net Domestic Assets (NDA) registered a growth of 16.7 percent in the year to December 2022, an improvement compared to a growth of 12.4 percent over a similar period in 2021. The growth in NDA was mainly supported by resilient growth in credit to the private sector as business activities improved. Growth of domestic credit extended by the banking system to the Government moderated to 11.6 percent in the year to December 2022 compared to a growth of 28.3 percent in the year to December 2021. Lending to other public sector also declined during the period, mainly due to repayments by county governments and parastatals. 30 Private Sector Credit: Private sector credit improved to a growth of 12.5 percent in the 12 months to December 2022 compared to a growth of 8.6 percent in the year to December 2021. All economic sectors registered positive growth rates reflecting increased credit demand following improved economic activities. Strong credit growth was observed in the following sectors: mining, transport and communication, agriculture, manufacturing, business services, trade, and consumer durables. Monthly credit flows (month on month) have also improved from Ksh 24.8 billion in December 2021 peaking at Ksh 28.0 billion in December 2022. 31 The National Government has launched the Hustlers Fund, as an intervention to correct market failure problems that led to predatory lending. This program aims to lift those at the bottom of the pyramid through structured products in personnel finance that includes savings, credit, insurance and investment 32 External Sector Developments: The overall balance of payments position improved to a surplus of USD 2,245.4 million (2.0 percent of GDP) in November 2022 from a deficit of USD 976.8 million (0.9 percent of GDP) in November 2021. This was mainly due to an improvement in the capital account despite a decline in the merchandise account reflecting increased imports of petroleum products owing to high international crude oil prices. 33 The current account deficit was generally stable at USD 5,771.0 million (5.2 percent of GDP) in November 2022 compared to USD 5,811.6 million (5.4 percent of GDP) in November 2021. The current account balance was supported by an improvement in the net receipts on the services account and the net secondary income balance despite a deterioration in the net primary income balance and merchandise account. 34 The capital account balance improved by USD 1,190.2 million to register a surplus of USD 1,386.3 million in November 2022 compared to a surplus of USD 196.1 million in the same period in 2021. Net financial inflows remained vibrant at USD 6,635.1 million in November 2022 compared to USD 6,696.3 million in 9 | P a g e November 2021. The net financial inflows were mainly in the form of other investments, financial derivatives and direct investments. Portfolio investments registered a net outflow during the period. 35 Foreign Exchange Reserves: The banking system’s foreign exchange holdings remained strong at USD11,407.7 million in November 2022 from USD 13,503.0 million in November 2021. The official foreign exchange reserves held by the Central Bank stood at USD 7,548.8 million compared to USD 9,306.3 million over the same period. 36 Capital Markets Development: Activity in the capital markets slowed down in December 2022 compared to December 2021 due to the outflow of investors as advanced economies tightened their monetary policy amid recession fears. The NSE 20 Share Index declined to 1,676 points in December 2022 compared to 1,903 points in December 2021 while Market capitalization also declined to Ksh 1,986 billion from Ksh 2,593 billion over the same period. 2.1.3 National Fiscal Overview 37 Budget execution in the first five months of FY 2022/23 progressed well. Revenues continued to record positive growth albeit revenue shortfall reflecting improvement in business environment, tax policy measures and enhanced revenue administration by the Kenya Revenue Authority. Revenue targets for the FY 2022/23 are also expected to be achieved considering the performance in the first five months. 38 Overall expenditures were below programme target underpinned by shortfalls recorded in revenue performance and inadequate liquidity in the government securities market. However, ministerial expenditure targets were not fully met partly due to low absorption of foreign and domestic financed projects. Disbursement to the counties was also short of the target for the period to November 2022 Revenue Performance 39 Revenue collection to November 2022 grew by 10.6 percent compared to a growth of 29.5 percent in November 2021. This decline in rate of growth is attributed to the fact that the previous FY’s growth was anchored on a lower base – a contraction recorded in the FY 2019/20 which had the effects of COVID- 19 pandemic. As at end November 2022, the cumulative total revenue inclusive of Ministerial Appropriation in Aid (A-i-A) was Ksh 893.8 billion against a target of Ksh 912.9 billion. This performance was Ksh 19.1 billion below the set target 40 Ordinary revenue to November 2022 recorded a growth of 9.5 percent compared to a growth of 27.2 percent in November 2021. This growth was also recorded in all broad categories of ordinary revenue. Specifically, Income tax grew by 10.3 percent, Value Added Tax (VAT) by 8.9 percent, Excise taxes by 7.9 percent, and Import duty by 18.8 percent. In nominal terms, ordinary revenue collection to November 2022 was Ksh 786.5 billion against a target of Ksh 818.7 billion. This performance was Ksh 32.2 billion below the target 41 Ministerial A-i-A inclusive of the Railway Development Levy was Ksh 107.3 billion against a target of Ksh 94.3 billion recording a surplus of Ksh 13.1 billion reflecting timely reporting of Semi-Autonomous Government Agencies (SAGAs) 10 | P a g e A-i-A. Ministerial A-i-A revenue, recorded 19.0 percent growth for the period ending November 2022 Expenditure performance 42 Total expenditure and net lending for the period ending November 2022 was Ksh 1,096.6 billion which was below the projected amount of Ksh 1,183.7 billion by Ksh 87.1 billion. Recurrent spending amounted to Ksh 825.6 billion, development expenditure was Ksh 149.0 billion while transfer to County Governments was Ksh 122.1 billion. 43 Recurrent spending was below the projected target by Ksh 18.8 billion mainly on account of lower than targeted expenditure on pensions and other CFS and domestic interest. Development expenditure was below target by Ksh 26.0 billion on account of below target disbursements to both domestic and foreign financed programmes by Ksh 14.3 billion and Ksh 11.6 billion respectively. 44 Fiscal operations of the Government by end of November 2022 resulted in an overall deficit including grants of Ksh 199.5 billion against a projected deficit of Ksh 268.2 billion. This deficit was financed through net domestic borrowing of Ksh 180.7 billion and net foreign financing of Ksh 39.0 billion. Fiscal Policy 45 The fiscal policy stance over the medium term aims at supporting the economic recovery agenda of the Government through a growth friendly fiscal consolidation plan designed to slowing the annual growth in public debt and implementing an effective liability management strategy, without compromising service delivery to citizens. This is expected to boost the country’s debt sustainability position and ensure that Kenya’s development agenda honours the principle of inter-generational equity. 46 The fiscal policy also indicates a deliberate convergence path towards the fiscal targets under the East African Community Monetary Union Protocol that sets a ceiling of fiscal deficit including grants of 3.0 percent of GDP and deficit excluding grants of 6.0 percent of GDP. 47 The fiscal policy will target to grow tax revenues above 17.8 percent of GDP in the FY 2023/24 and above 18.0 percent of GDP over the medium term. As part of the economic turnaround plan, the Government will scale up revenue collection efforts by the Kenya Revenue Authority (KRA) to Ksh 3.0 trillion in the FY 2023/24 and Ksh 4.0 trillion over the medium term. 11 | P a g e 2.2 County Economic and Fiscal Overview 2.2.1 County Economic Overview 49 Livestock keeping is the mainstay of Isiolo County economy. About 80 percent of the inhabitants derive their livelihood from livestock enterprise. The livestock production employs about 70 percent of the rural labour force. The County is endowed with enormous livestock resources. The estimated livestock population is 198,424 heads of cattle, 398,903 goats, 361,836 sheep and 39,084 camels (2009 census). The main drawbacks to the improvement of the livestock production include: poor governance of the rangelands largely due to the absence of an appropriate legal framework of land tenure, livestock diseases, frequent droughts and sometimes flooding, lack of an organized market for livestock and livestock products, and inappropriate and inadequate systems of social and financial service provision. 50 The optimal operationalization of Isiolo International Airport, completion of both LAPSSET Project and Isiolo resort city is expected to stimulate rapid economic growth. These projects will turn Isiolo county and its environs into a major tourist destination and a Regional Economic Hub. It will open the northern frontier, thereby attracting both domestic and foreign investments. The completion of Isiolo abattoir will also improve the livelihoods of Isiolo people through improvement of livestock market. 2.2.2 County Fiscal Overview 51 The revised Approved Budget under supplementary I for the Financial Year 2022/23 amounts to Kshs.6,460,705,128 with Kshs.4,142,009,517(64.1 percent) allocated for Recurrent Expenditure and Kshs.2,318,695,611 (35.9 percent) for Development Expenditure. 2.2.2.1 County Revenue Analysis 52 To be able to finance the budget for the Financial Year 2022/23, the County Government is expected to receive total revenue of Kshs.6,460,705,128 whose breakdown is as shown in the table 2 below. 12 | P a g e Table 2: 2022/23 Supplementary 1 Expected Revenue REVENUE Budget Estimate 2022/23 Supplementary % 2022/23 Budget estimate EXTERNAL REVENUE ESTIMATES EQUITABLE SHARE 4,710,388,265 4,710,388,265 72.91% General Provisions (Equitable Share) 4,710,388,265 4,710,388,265 72.91% CONDITIONAL ALLOCATIONS FROM NATIONAL 90,800,000 102,000,000 1.58% GOVERNMENT Supplement for Construction of County Headquarters 90,800,000 102,000,000 1.58% CONDITIONAL ALLOCATIONS FROM DEVELOPMENT 518,635,657 401,955,171 6.22% PARTNERS Current Grants from Foreign Governments Danida 8,937,800 13,642,875 0.21% Climate Smart Agricultural Project world bank 330,699,130 259,805,034 4.02% Financing Locally led climate action world bank 125,000,000 22,000,000 0.34% World bank – emergencylocust response 44,469,550 84,469,550 1.31% Sweden Agricultural Sector Development Support 9,529,177 19,697,797 0.30% Programme (ASDSP) Isiolo County KUSP Account UIG world bank 1,145,356 0.02% Isiolo County KUSP Account UDGworld bank 1,194,559 0.02% Balanceb/f 1,065,959,923 16.50% CBK County Revenue Fund 1000171715 552,945,479 8.56% CBK Isiolo County Health Services 1000270721 22,329,360 0.35% CBK Isiolo County Fuel Levy 1000293427 11,424 0.00% CBK Isiolo County Village Poly Proj 1000369377 10,000 0.00% CBK Isiolo County Kenya Climate Smart Agr 270,674,583 4.19% 1000371315 CBK Isiolo County Urban Development 1000392266 65,320,119 1.01% CBK Isiolo County Urban Institutional 1000392274 255,182 0.00% CBK Isiolo County Livestock Support 1000392298 243,151 0.00% Isiolo County KDSP Account 1000426845 120,482,795 1.86% Isiolo County Emergency Locust Re Account 28,903,581 0.45% 1000580615 Isiolo County Primary Health Care 1000580607 danida 4,784,248 0.07% Sub - Total 0.00% GROSS COUNTY EXTERNAL REVENUE ESTIMATES 5,319,823,922 6,280,303,359 97.21% GROSS COUNTY OWN SOURCE REVENUE ESTIMATES 113,686,337 180,401,768 2.79% GROSS COUNTY REVENUE ESTIMATES 5,433,510,259 6,460,705,128 100.00% 53 The total revised budget under supplementary 1 revenue estimate for fiscal year 2022/23 is Kshs. 6,460,705,128 that includes Kshs. 180,401,768from local revenue sources, Kshs. 4,710,388,265 from equitable share, Kshs. 102,000,000 from additional Conditional Allocations from the National Government (supplement for construction of county head quarters), and Kshs. 401,955,171from Conditional Allocation from development partners from loans and grants to County Government (includes Ksh 13,642,875 from Danida, Ksh. 259,805,034 for climate Smart Agriculture Project, Ksh. 22,000,000 from 13 | P a g e Financing Locally led climate action, Ksh. 84,469,550from World Bank- emergency locust response and Ksh 19,697,797 from ASDSP. The balance from financial year 2021/22 was Ksh. 1,065,959,923. Revenue Received from exchequer as at 31st December 2022 54 In the first half of financial year 2022/23, the County had receipts of Ksh. 2,701,674,697 comprising of Ksh. 1,554,428,128 from the equitable share, Ksh. 81,286,646 local revenue and a balance brought forward of Kshs. 1,065,959,923 from financial year 2021/22. The table below provides a summary of the revenues received from the National Government and balances brought forward during the first half of the financial year 2022/23. Table 3: Direct Transfers from National Government REVENUE Approved Estimates Approved Actual Cumulative for FY 2022/2023 Supplementary 1 for receipts FY 2022/23 EQUITABLE SHARE 4,710,388,265 4,710,388,265 1,554,428,128 General Provisions (Equitable Share) 4,710,388,265 4,710,388,265 1,554,428,128 CONDITIONAL ALLOCATIONS FROM NATIONAL 90,800,000 102,000,000 - GOVERNMENT Supplement for Construction of County 90,800,000 102,000,000 - Headquarters CONDITIONAL ALLOCATIONS FROM 518,635,657 401,955,171 - DEVELOPMENT PARTNERS Current Grants from Foreign Governments Danida 8,937,800 13,642,875 - Climate Smart Agricultural Project world bank 330,699,130 259,805,034 - Financing Locally led climate action world bank 125,000,000 22,000,000 - World bank – emergency locust response 44,469,550 84,469,550 - Sweden Agricultural Sector Development Support 9,529,177 19,697,797 - Programme (ASDSP) Isiolo County KUSP Account UIG world bank 1,145,356 - Isiolo County KUSP Account UDG world bank 1,194,559 - Balanceb/f 1,065,959,923 1,065,959,923 CBK County Revenue Fund 1000171715 552,945,479 552,945,479 CBK Isiolo County Health Services 1000270721 22,329,360 22,329,360 CBK Isiolo County Fuel Levy 1000293427 11,424 11,424 CBK Isiolo County Village Poly Proj 1000369377 10,000 10,000 CBK Isiolo County Kenya Climate Smart Agr 270,674,583 270,674,583 1000371315 CBK Isiolo County Urban Development 65,320,119 65,320,119 1000392266 CBK Isiolo County Urban Institutional 1000392274 255,182 255,182 CBK Isiolo County Livestock Support 1000392298 243,151 243,151 Isiolo County KDSP Account 1000426845 120,482,795 120,482,795 Isiolo County Emergency Locust Re Account 28,903,581 28,903,581 1000580615 Isiolo County Primary Health Care 1000580607 4,784,248 4,784,248 danida Sub - Total GROSS COUNTY EXTERNAL REVENUE ESTIMATES 5,319,823,922 6,280,303,359 2,620,388,051 COUNTY OWN SOURCE REVENUE ESTIMATES 113,686,337 180,401,768 81,286,646 GROSS COUNTY REVENUE ESTIMATES 5,433,510,259 6,460,705,128 2,701,674,697 Source: County Treasury 14 | P a g e Internal Revenue 55 In the first half of financial year 2022/23, the County collected Ksh. 81,286,646.7 out of a half year revised target of Ksh. 90,200,884. This represents a revenue shortfall of 10% of the revised target. The largest revenue contributor was Game fees i.e Ksh 74,888,373 –this represents 83% of the total revenue collection for the first half of FY 2022/23. 56 The table below provides a summary of the revenues received from the various streams during the first half of the financial year 2022/23 against their set targets. Table 4: Local Revenue Collection Performance in the First half year of FY 2022/23 REVENUE SOURCE Approved Revised Target- Actual Receipt Percentage of Target Supplementary 1 half year revised target Plot application/Transfer/Sub Division 868,000 868,000 411,400 47% LAND RENTS - - Land Rent/Rates – current 3,597,538 3,597,538 1,296,940 36% Penalties Rent/Rates 750,000 750,000 59,522 8% Land Rent/Rates – Arreas 2,788,000 2,788,000 3,010,224 108% CESSES - - Livestock Auction 2,094,497 2,094,497 917,590 44% Sand Cess 7,100,000 7,100,000 840,000 12% Barter/Murram/Audit/fire charge/hide skin 1,618,776 1,618,776 32,100 2% OTHER MISCELLANIOUS RECIEPT - - Miraa export/cess 2,009,078 2,009,078 1,623,450 81% S.B.P fees 3,278,401 3,278,401 1,195,020 36% Promotion, Advertisement/branding/Miscellenious 475,000 475,000 - 0% Liquor lisence 1,900,000 1,900,000 - 0% Public works/other charges 600,000 600,000 - 0% Stand Premium 642,768 642,768 36,000 6% Consent and clearance, Transfer 2,152,998 2,152,998 58,000 3% Lease extension, survey 627,000 627,000 - 0% Livestock Veterinary/meat inspection 798,000 798,000 245,000 31% Weight and Measures 375,000 375,000 9,900 3% Public Inspection - Public Health - - Tractor Hire/tourism bus 549,946 549,946 - 0% Agriculture Training Centre 440,000 440,000 - 0% PARK REVENUE - - Game entrance/Royalties 17,065,065 51,422,781 67,484,560 131% MARKET/TRADE CENTRE - - Market Stalks/Fee and Produce 715,223 715,223 691,800 97% VEHICLE PARKING - - - Street parking fees 3,740,000 2,740,000 1,913,066 70% HEALTH FACILITIES OPERATION ROOM - - Hospital cost sharing 786,893 786,893 869,055 110% SLAUGHTER HOUSE - - Slaughter fees 1,256,788 1,256,788 559,020 44% TECHNICAL SERVICE - - Building plan approval/bill and sign board 614,201 614,201 34,000 6% TOTAL 56,843,168 90,200,884 81,286,647 90% Source: County Treasury, 2023 15 | P a g e Analysis of performance of local revenue in the first half of FY 2013/14 to first half of FY 2022/23 (in Ksh. Millions) Table 5: Half year OSR performance FY 2013/14 to FY 2022/23 Revenue 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Source Target 180 180 180 125 91 75 78 56 56 90 Actual 73 79 60 58 54 87 96 21 51 81 HALF YEAR OWN SOURCE REVENUE PERFORMANCE FROM FY 2013/14 TO FY 2022/23 200 180 160 140 120 100 Target Actual 80 60 40 20 0 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Figure 1: Half Year Local Revenue Performance from FY 2013/14 to FY 2022/23 16 | P a g e 57 The table below shows a detailed half year performance of local revenue per revenue stream for the FY 2021/22 and 2022/23. Table 6: Comparison of Local Revenue Collection Performance for the First half of FY 2021/22 and 2022/23 REVENUE SOURCE ACTUAL RECEIPTS ACTUAL RECEIPTS DEVIATION IN THE FIRST HALF IN THE FIRST HALF OF 2021/22(KSH.) OF 2022/23 (KSH.) Plot application/Transfer/Sub Division 676,500 411,400 (265,100) LAND RENTS - - - Land Rent/Rates – current 1,206,589 1,296,940 90,351 Penalties Rent/Rates 39,088 59,522 20,434 Land Rent/Rates –Arrears 3,069,447 3,010,224 (59,223) CESSES - - - Livestock Auction 1,859,855 917,590 (942,265) Sand Cess 2,176,000 840,000 (1,336,000) Barter/Murram/Audit/fire charge/hide skin 143,450 32,100 (111,350) OTHER MISCELLANIOUS RECIEPT - - - Miraa export/cess 2,440,050 1,623,450 (816,600) S.B.P fees 1,118,355 1,195,020 76,665 Promotion, Advertisement/branding/Miscellaneous - - - Liquor licence - - - Public works/other charges - - - Stand Premium 190,000 36,000 (154,000) Consent and clearance, Transfer - 58,000 58,000 Lease extension, survey 268,475 - (268,475) Livestock Vertinary/meat inspection 27,100 245,000 217,900 Weight and Measures 131,775 9,900 (121,875) Public Inspection - Public Health - - - Tractor Hire/tourism bus - - - Agriculture Training Centre - - - PARK REVENUE 30,198,925 - (30,198,925) Game entrance/Royalties - 67,484,560 67,484,560 MARKET/TRADE CENTRE 1,078,800 - (1,078,800) Market Stalks/Fee and Produce - 691,800 691,800 VEHICLE PARKING 2,514,534 - (2,514,534) Street parking fees - 1,913,066 1,913,066 HEALTH FACILITIES OPERATION ROOM 3,527,730 - (3,527,730) Hospital cost sharing - 869,055 869,055 SLAUGHTER HOUSE 788,940 - (788,940) Slaughter fees - 559,020 559,020 TECHNICAL SERVICE 14,800 - (14,800) Building plan approval/bill and sign board - 34,000 34,000 TOTAL 51,470,413 81,286,647 29,816,234 Source: County Treasury, 2023 17 | P a g e 2.2.3 County Expenditure Analysis 58 The County spent a total of Ksh. 1,682,308,793 during the first half of financial year 2022/23 against a revised annual approved budget of Ksh. 6,460,705,128which represents an absorption rate of 26% percent of the total budget and a 10 percent increase from the performance in a similar period in FY 2021/22. The total expenditure in a similar period in FY 2021/22 was Ksh. 1,528,485,053. 59 A total of Ksh.1,519,304,515 was spent on recurrent activities in the first half of financial year 2022/23. The recurrent expenditure for the period under review represented 37 percent of the approved supplementary 1 recurrent budget, and an increase of 35% compared to a similar period in financial year 2021/22. 60 A total of Ksh.163,004,278 was spent on development activities in the first half of Financial Year 2022/23. This represents an absorption rate of 7% of the total revised development budget. This is a decrease of 60% from the amount spent in a similar period in financial year 2021/22.(i.e. development expenditure in the first half of FY 2021/22 was Ksh.406,649,572) 2.2.3.1 Recurrent Expenditure Analysis 61 The total recurrent expenditure during the review period (first half of the financial year 2022/23 was Ksh.1,682,308,793 against a half year recurrent budget of Ksh.2,071,004,758.5 representing an absorption rate of 73% percent. The county absorbed 37% of the annual revised recurrent budget and this reflected an under absorption of 29% in the first half of the FY 2022/23 caused by delays in procurement of goods and services and release of funds by the exchequer. The table below provides the analysis of recurrent expenditure and budget absorption rate by sectors. Table 7: Departmental Recurrent Expenditure Analysis for the first half of the FY 2022/23 Half Year Approved Half Year Actual Approved Recurrent Revised Revised Recurrent Absorp Recurrent Budget for Budget Budget (Supp Expenditure tion Budget for half Year FY (Supp 1) FY 1) FY for FY Rate Department FY 2022/23 2022/23 2022/23 2022/23 2022/23 (%) County assembly 448,252,680 224,126,340 448,252,680 224,126,340 149,406,357 67% Office of the Governor 290,040,316 145,020,158 327,073,316 163,536,658 149,724,620 92% County Public Service Board 70,639,215 35,319,608 68,800,000 34,400,000 30,914,075 90% Deputy Governor 24,000,000 12,000,000 24,900,000 12,450,000 11,500,839 92% County Secretary 44,692,234 22,346,117 51,292,234 25,646,117 26,256,778 102% Administration and PSM 187,747,839 93,873,920 248,796,618 124,398,309 41,810,951 34% Delivery Unit 22,204,882 11,102,441 20,050,207 10,025,104 14,017,849 140% Cohesion, Intergovernmental Relations,Aid 35,992,850 17,996,425 33,072,640 16,536,320 19,762,176 120% 18 | P a g e Half Year Approved Half Year Actual Approved Recurrent Revised Revised Recurrent Absorp Recurrent Budget for Budget Budget (Supp Expenditure tion Budget for half Year FY (Supp 1) FY 1) FY for FY Rate Department FY 2022/23 2022/23 2022/23 2022/23 2022/23 (%) coordination, Disaster Management Finance and Economic Planning 166,127,379 83,063,690 475,802,507 237,901,254 65,726,466 28% Special Programmes and ICT 41,663,959 20,831,980 191,466,920 95,733,460 17,324,691 18% Economic Planning 63,736,173 31,868,087 72,926,773 36,463,387 30,231,410 83% Lands and Physical Planning 23,873,199 11,936,600 26,630,000 13,315,000 6,398,000 48% Roads and Infrastructure 16,016,000 8,008,000 16,566,000 8,283,000 5,961,387 72% Public Works and Housing 22,751,268 11,375,634 21,432,868 10,716,434 22,245 0% Municipal Administration 57,410,772 28,705,386 66,411,310 33,205,655 15,931,044 48% Agriculture 55,013,358 27,506,679 55,859,377 27,929,689 2,357,182 8% Livestock, Veterinary and Fisheries 113,437,775 56,718,888 125,807,775 62,903,888 6,746,650 11% Education and Vocational Training 228,898,884 114,449,442 229,898,884 114,949,442 22,264,963 19% Youth and Sports 22,331,991 11,165,996 23,651,991 11,825,996 2,425,200 21% Culture and Social Services 20,884,319 10,442,160 19,104,319 9,552,160 5,360,000 56% Tourism and Wildlife Management 139,781,330 69,890,665 136,281,330 68,140,665 79,414,982 117% Trade, Industries, Cooperatives 25,106,543 12,553,272 26,176,387 13,088,194 4,518,082 35% Water and Irrigation 56,377,162 28,188,581 61,277,162 30,638,581 21,122,288 69% Environment and Natural Resources 23,381,772 11,690,886 22,706,772 11,353,386 8,230,358 72% 1,302,960,23 1 ,347,771,44 Health Services 5 651,480,118 7 673,885,724 781,875,922 116% 3,503,322,1 4,142,009,5 TOTAL 35 1,751,661,068 17 2,071,004,759 1,519,304,515 73% Source: County Treasury, 2023 2.2.3.2 Development Expenditure Analysis 62 The total development expenditure during the review period (first half of the financial year 2022/23) was Ksh.163,004,278against a full year budget of Ksh.2,318,695,611 representing an annual absorption rate of 7 percent and 14% of the projected half year budget. The expenditure is caused by delays in procurement of development projects and releases of funds by the exchequers. The table below provides the analysis of development expenditure during the first half of the financial year 2022/23. 19 | P a g e Table 8: Departmental Development Expenditure Analysis for the first half of the FY 2022/23 Department Approved Approved Revised Half Year Half Year Absorption Development Development Development Revised Actual rate Budget for FY Budget for half Budget for FY Development Development 2022/23 year of FY 2022/23 Budget (Supp 1) Expenditure 2022/23 (Supplementary FY 2022/23 for FY 1) 2022/23 County Assembly services 188,000,000 94,000,000 219,000,000 109,500,000 20% 21,710,500 Office of governor - - - - - CPSB - - - - - Deputy governor - - - - - County Secretary - - - - - Delivery unit - - - - - Finance 90,800,000 45,400,000 387,118,179 193,559,089 - 0% Special program 110,000,000 55,000,000 110,000,000 55,000,000 150% 82,500,000 Cohesion 10,000,000 5,000,000 - - - Planning 10,000,000 5,000,000 10,000,000 5,000,000 0% lands 62,400,000 31,200,000 39,000,000 19,500,000 - 0% Roads 165,500,056 82,750,028 111,011,424 55,505,712 - 0% public works 7,000,000 3,500,000 - - - Municipality 165,036,430 82,518,215 155,551,108 77,775,554 61% 47,581,778 Agriculture 431,117,147 215,558,574 879,936,385 439,968,192 0% Livestock 42,544,000 21,272,000 15,193,151 7,596,576 - 0% Education 37,965,185 18,982,593 17,375,185 8,687,593 0% Youth & Sport 57,999,944 28,999,972 37,999,944 18,999,972 59% 11,212,000 Culture and social services 24,242,945 12,121,473 7,996,047 3,998,024 - 0% Tourism and Wildlife 20,000,000 10,000,000 12,000,000 6,000,000 - 0% Trade 17,590,347 8,795,174 - - - Public Services 4,000,000 2,000,000 - - - Administration 20,000,000 10,000,000 7,000,000 3,500,000 - 0% Water and Sanitation 127,791,804 63,895,902 116,491,804 58,245,902 - 0% Environment 150,806,983 75,403,492 47,806,983 23,903,492 - 0% Health Services 187,393,283 93,696,642 145,215,400 72,607,700 0% Total 1,930,188,124 965,094,062 2,318,695,611 1,159,347,805 163,004,278 14% Source: County Treasury, 2023 63 Going forward the county needs to first track the implementation of the budget especially Development Projects by: i. Carrying out prefeasibility studies of projects, acquisition of sites, having approved Bill of quantities and any other things that may delay the project implementation. ii. Establishment of project implementation committees iii. Seeking technical expertise aid from other government agencies 20 | P a g e CHAPTER THREE FORWARD ECONOMIC AND FISCAL DEVELOPMENTS Economic Outlook 64 The global economic outlook remains highly uncertain with growth projected to slowdown from 3.2 percent in 2022 to 2.7 percent in 2023. This projected growth in 2023 was revised downwards from the initial projection of 2.9 percent largely reflecting a slowdown in advanced economies despite a gradual pick up in the emerging market and developing economies. National Forward Economic and Fiscal Development 65 Domestically, the economy continued to expand, albeit at a slower pace than the 7.5 percent recorded in 2021. Real GDP grew by 5.5 percent in the first three quarters of 2022 (6.7 percent in quarter one, 5.2 percent in quarter two and 4.7 percent in quarter three) supported by the ongoing recovery in the services sector, driven by accommodation and food services, wholesale and retail trade, finance and insurance, education and transport and storage. 66 The economy is expected to grow by 5.5 percent in 2022 and recover in 2023 to 6.1 percent and maintain that momentum over the medium-term (in terms of fiscal years the economic growth is projected at 5.8 percent in the FY 2022/23 and 6.1 percent in the FY 2023/24). This growth will be supported by a broad- based private sector growth, including recoveries in agriculture while the public sector consolidates. From an expenditure perspective, private consumption is expected to support aggregate demand, supported by the ongoing labour market recovery, improved consumer confidence, and resilient remittances. 67 The growth outlook will be reinforced by the Government’s development agenda geared towards economic turnaround and inclusive growth. Special focus will be placed on increased employment, more equitable distribution of income, social security while also expanding the tax revenue base, and increased foreign exchange earnings. The economic turnaround programme will seek to increase investments in at least five sectors envisaged to have the biggest impact on the economy as well as on household welfare. These include Agriculture; Micro, Small and Medium Enterprise (MSME); Housing and Settlement; Healthcare; and Digital Superhighway and Creative Industry. 68 In furtherance of the agenda on inclusive growth and innovation in Micro, Small, and Medium Enterprises (MSMEs), the Government has launched the Hustlers Fund, as an intervention to correct market failure problems at the bottom of the pyramid. This program aims to lift those at the bottom of the pyramid through structured products in personnel finance that includes savings, credit, insurance and investment. To address the adverse impact of the ongoing drought, the Government in partnership with the Development Partners and the private sector under the auspices of the National Steering Committee on Drought Response has provided response to affected persons, regions and communities. The Committee will work with both the National and County Governments in strengthening the national capacity for resilient recovery to protect 21 | P a g e development gains from recurrent drought. 3.3 County Forward Economic and Fiscal Development 69 Broad strategic priorities and policy are specified in the CFSP that will guide the County Government in the preparation of the budget for FY 2023/24 and over the medium term. The County Government will ensure that it continues to work with the National Government, development partners and other counties in addressing development challenges facing residents of Isiolo County. 70 The County government will implement policies set out in CIDP II over the medium term with a focus on priority programmes identified in public participation forums with a view of securing socio- economic development. The County will focus on resource mobilization through grants and development partners to support development agenda across all sectors over the medium term. Revenue collection will be heightened by ensuring there are sufficient legislations to guide revenue collection, ensure there are no loopholes, improved enforcement and compliance and full integration of revenue collection. 3.3.1 County Fiscal Overview 3.3.1.1 County Revenue Analysis 71 The County Government is expected to receive total revenue of Ksh.5,333,489,886 in the financial year 2023/2024. Whose breakdown is as follows: i. Equitable share Ksh.4,899,041,209 ii. Transfer for Library Service Ksh.7,025,011 iii. Financing Locally Led Climate Action( FLLoCA) Ksh.136,000,000 iv. UNFPA Ksh.12,476,986 v. Local Revenue is however projected at Ksh.271,208,180 The table below provides a summary of the revenue projections. Table 9: Summary of Revenue Projections for FY 2023/24 REVENUE BUDGET SOURCES BUDGET PERCENTAGE ESTIMATES 2023/24 EXTERNAL REVENUE ESTIMATES EQUITABLE SHARE 4,899,041,209 General Provisions (Equitable Share) 4,899,041,209 91.85% CONDITIONAL ALLOCATIONS FROM DEVELOPMENT 163,240,497 PARTNERS & NAT. GOVT. Current Grants from Foreign Governments Danida 7,738,500 0.15% Financing Locally Led Climate Action( FLLoCA) 136,000,000 2.55% UNFPA 12,476,986 0.23% Transfer for Library Service 7,025,011 0.13% GROSS COUNTY EXTERNAL REVENUE ESTIMATES 5,062,281,706 INTERNAL COUNTY OWN REVENUE ESTIMATES GROSS INTERNAL REVENUE ESTIMATES 271,208,180 5.09% GROSS COUNTY REVENUE ESTIMATES 5,333,489,886 Source: Budget Policy Statement, 2023 22 | P a g e CHAPTER FOUR STRATEGIC PRIORITIES AND INTERVENTIONS 4.1 Overview Over the Medium-Term the County government is targeting supporting growth in the following priority areas. 4.1.1 Livestock Management and Crop Productivity 72 Low agricultural and livestock productivity, post-harvest loses, value addition, access to markets and financial intermediation and inclusion. Low agricultural productivity arises from to inadequate extension services, high reliance of rain fed agriculture, poor quality farm inputs such as seeds and fertilizers, crop and livestock pest diseases and poor farming methods and wildlife destruction. High post-harvest loses are experienced within the county because of poor storage methods, lack of storage facilities and inadequate knowledge on post-harvest management. Poor market linkages and inadequate market information has led to exploitation of farmers by intermediaries hence fetching low prices for produce. 73 The government intends to invest in the following as a means of mitigating the challenges above: Scale-up of appropriate climate resilient technologies and best practices [Soil & water conservation; Rainwater harvesting systems for dry land agriculture, Scale-up adoption of value chain-linked farm pond systems, etc, Scale-up integration of Nutrition-sensitive production, Promote market-linked micro-Irrigation agriculture, Technologies & Best practices on Post-harvest loss management, Agribusiness opportunities for Youth, Women & PLWD, Support livestock value chains including poultry production, Bee keeping, Pasture production (Fodder banks & seed Bulking), Scale-up of village group saving schemes and Micro-finance, Entrepreneurship / Agribusiness Training, Financial literacy skills, etc., Promote agribusiness and Value addition along selected value chains (e.g. camel milk ) – youth & women and the Support for innovations for livelihood diversification through but not limited to Income Generation Activities (IGAs). 74 The above interventions are aimed at strengthening the economic base of Isiolo residents thereby enhancing community resilience and sustainably ensure that different households and communities meet their production related infrastructural needs, gain knowledge. 75 The interventions also provide strengthen capacity of all value chain actors – farmers and traders in the various value chain enterprises. Supporting of viable agricultural enterprises targeting youth is geared towards strengthening their resilience. Programme design of the various interventions and programmes therefore takes into account issues of building capacity among households with special interest vested on youth and women to facilitate their transitioning into viable commercial entities. All ensuing programmes from the above interventions will strengthen the capacity of Project Management Committees (PMCs). 23 | P a g e 4.1.2 Water Resource Management 76 The access to water and its basis for food security and drinking remains the most pressing development need in Isiolo County. The major challenges within this thematic area include; long distance to water points, unavailability of water for domestic use and irrigation, land degradation, depletion of water towers, wetlands and catchment areas as well as water governance challenges. These challenges are mainly because of increase in stalling and incompleteness of water projects, poor rains, inadequate water sources, inadequate distribution of the available water, and siltation of earth dams, poor management of water sources, environmental degradation and climate change. 77 To address the water challenges, the county intends to invest in water harvesting across the rivers, repair and restore all broken, stalled and incomplete water projects, finalization of draft water policy to guide on household water harvesting and water governance. The County will conduct prefeasibility studies and design dams, which will be designed to be cross-ward/ sub ward. Moreover, the Government will expand the county water coverage initiative, with a target to increase availability, and access to safe water for communities. This will be done through; Construction of 2 medium sized sand dams, drilling 10 new boreholes and promotion of rainwater harvesting at HH and institutions in the medium term. 78 Environmental conservation and forestation programme will also be key to ensure water sources and catchment areas are protected. Further, climate smart initiatives shall be integrated in all development initiatives. Water resource management and governance programme will ensure sustainability of water projects and effective management. 4.1.3 Health services 79 The County has a poorly distributed health facility network with a number in rural areas that affects Access to Quality and Affordable Health Services. The service delivery is equally affected by shortage of technical staff, inadequate supply of medical equipment and medical supplies/commodities. Inadequate personnel, inadequate medical equipment and drugs in health facilities hamper access to quality health care. The sector prioritizes efforts to enhance the community health strategy to improve access to primary health care at the lowest level in the community. Efforts will be geared towards equipping existing facilities. 80 The budget for financial year 2023/24 will focus on reversing the rising burden of communicable and non-communicable conditions by minimizing the health risks through: I. Equipping, provision of drugs and medical equipment to all health care centres. II. Rehabilitation, equipping and staffing of the existing health facilities III. Strengthening health management information system; and IV. Strengthening collaboration with private and other sectors that have an impact on health improvements 24 | P a g e 4.1.4 Early Childhood Development and Vocational Development 81 The devolved education function is ECDE and village polytechnics. The public raised concerns about the quality of technical education in which most of the County Technical Training polytechnics are faced with low enrolment, inadequate equipment and learning tools, inadequate infrastructures as well as community apathy towards training at County polytechnic. The county government will invest in upgrading and restructuring the polytechnics to produce market competitive graduates. The communities raised issues on the quality of ECDE education and proposed interventions to address staffing, infrastructure and retention in ECDEs. The county government will continue to support needy students through scholarships. 4.1.5 Lands, Urban Planning and Development 82 This area is critical in enhancing the delivery of basic services to the population and organizes urban development. The challenges posed by poorly organized patterns of settlement in the urban and rural areas making service delivery costly. Further, the public identifies emerging challenging in the sector that includes poor town and market planning, weak implementation of town and market plans, inadequate supportive urban infrastructure poor solid and liquid waste management systems, inadequate time consuming land adjudication services and inadequate survey, mapping and land titles among farmers and land owners in urban areas. 83 To address the challenges the government intends to formulate favorable physical planning, housing and land resource land policies for efficient realization of orderly land use and urban development. This includes improving urban planning and infrastructure development, improving land information management (digitization of land registry and the increasing households with secure land tenure system through the following: 84 Integrating urban planning, infrastructure development and housing: the focus for intervention will be lighting, drainage, urban road developments, urban land planning and titling, solid and liquid waste management. Increasing urbanization has led to an increasing demand for low cost modern housing. 85 Enhancing Land survey, planning and titling: This will target urban land ownership, mapping and issuance of title deeds throughout the county. Land being a key factor of production, titling will provide an impetus to land development. The county will also target to improve slow land succession processes through collaboration with relevant national agencies to unlock land adjudication within the county. 4.1.6 Sports and Talent Development 86 In sports and talent development, the public identified limited participation in sporting activities due to poor and inadequate sporting activities. The public prioritized sporting funding at the community level to fully engage the idle youths in productive activities, develop talent and ultimately earn livelihood from sports. The county government will invest in nurturing talents; both performing sporting talents and infrastructure across the county to ensure communities earn livelihoods from their talents. 25 | P a g e 4.1.7 Youth empowerment 87 The youth aged between 18 – 35 years constitute a large proportion of the county population. The main challenge facing the youth is high unemployment, limited access to economic opportunities and limited mentorship. Additionally, the youths are affected by high incidences of drug and substance abuse as well as increased engagement in criminal activities. The county government has prioritized youth empowerment programme, which will focus on. I. Enhancing technical training with market driven courses. This will include establishment of innovation hub at the training centres. II. Drug and substance awareness and rehabilitation programme. III. Mentorship programme targeting youths in and out of school on life issues as well as career wise; and IV. Mainstreaming youth empowerment across the sectoral intervention 4.1.8 Tourism Development and wildlife Conflict Management 88 The County has a huge potential in tourism since it is strategically endowed with both natural beauty and abundance of fauna and flora including species which are endemic to the region like Grey Zebra, reticulated giraffe, Somali ostrich, lesser kudu and Beisa Oryx. The County is also endowed with diverse and rich cultural heritage from various ethnic groups living within the County which if marketed has the potential to generate income and create jobs. 89 Some sections of the county have been experiencing increased trends of human – wildlife conflict due to the increased competition for limited resources. This has led to loss of livelihoods for farmers and households and in some extreme cases loss of lives from snakebites and being mauled by wild animals. The county government will collaborate with all agencies and jointly work with the communities to empower them to be part of the solution and not merely victims. 4.1.9 Social Protection 90 Under social protection, the public prioritized empowerment of the persons living with disability to access economic opportunities. Members of the public raised concerns about the cash transfer programmes targeting the elderly, OVCs and severely disabled persons being inadequate and poor targeting. Other notable issues included gender-based violence, child protection rights and PWD support. The sector will address the issues through: I. Mainstreaming disability issues within the main interventions across all sectors II. Roll out a comprehensive Gender Based Violence Recovery mechanism that will encompass provision of legal services to victims of gender-based violence; raising awareness in the communities on effects of gender-based violence and sexual harassment. The intervention will include training. III. Community members (development committees and community resource volunteers) on paralegal as well as establishment of safe houses for the victims of GBV as well as rehabilitation centers. 26 | P a g e IV. Enhancing child protection rights through children advocacy forums at the ward level. 4.1.10 County Assembly 91 The County Assembly will continue to concentrate on development of The County Assembly Chamber. 4.2 CIDP Enablers 2023 – 2027 92 Enablers help to create facilitating environment and support systems for the attainment of desired outcomes out of the county programs and projects. The thematic area involves; road network and connectivity, market infrastructure, access to reliable energy, institutional development and knowledge management, effective citizen engagement and Information Technology Infrastructure. 93 Key development challenges facing our County include poor road infrastructure, low land owners, connectivity to electricity, limited green energy installation and consumption, low literacy levels of the communities including in management and sustainability of projects and usage of ICT, unclear means of government-citizen feedback and redress mechanism, inadequate access to information, low government services automation and integration. 94 To help address poor road infrastructure, the county will develop road network inventory and maintenance modalities to ensure that connectivity is seamless within the county. There is need for development a road network and maintenance policy to guide road network management. Urban Roads and storm water control Improvement. The government will continue to upgrade Isiolo municipal roads to paved standards. More investments will also be targeted at improving and develop Isiolo municipal drainage systems. 95 Limited government services automation and integration hamper service delivery and incapacitate the county in tracking, recording and reporting of county processes and finances. The county will now focus on financing finalization of ICT policy and a master plan to map out automation and integration requirements. 96 The County Government will leverage on the fibre optic connectivity to enhance access of ICT in the County. This will be in an effort to ensure proper systems automation and integration of County Government services. 97 As a means of enhancing staff capacity building at low cost and internal facilitation, the county will create modalities of creating a depository of information and means of structured staff training one another. The depository is to be expanded to include archiving of county processes and milestones that the county government has gone through since 2013. The depository will also be used in engaging the benchmarking visits from national and international delegations to apprise them of our processes and journey. The depository will later evolve to a county academy offering customized trainings of our processes and models especially those of participatory planning and budgeting, civic education and citizen engagement. 98 For the enhancement of access to information and strengthening of the people’s sovereignty at the grassroots of the county and the support for elected 27 | P a g e development committees and project management committees. Further, the county government shall optimize the social halls to make them more available to communities and the governance structures as per the public participation policy. 99 As much as the county has instituted performance management, it is now needed to evaluate the impact of the process and flag out issues for improvement. Wide public sector reforms also need to be focused on to improve service delivery. In addition to performance contracting, other public sector reforms for focusing by the county include instituting results based management, performance improvement programs, capacity building and business process re-engineering focusing on redesigning processes based on customer needs and global competitiveness for better service delivery and sustainable results. 28 | P a g e CHAPTER FIVE FISCAL POLICY AND BUDGET FRAMEWORK This section presents consolidated fiscal policies and framework for FY 2023/2024 and MTEF; and measures the County Government will take in budget allocation. County Fiscal Policy The policy aims at shifting more public resources from recurrent to development expenditure to promote sustainable and inclusive growth in the long run. Specifically, over the medium term, at least 30 percent of the budget shall be allocated to development expenditure. Much emphasis will be put on efficiency and improving the productivity of expenditure while at the same time ensuring that adequate resources are available for operations, maintenance, and development. Expenditure will promote equitable development as well as making provisions for any marginalized groups in the County. Much emphasis is placed on prudent fiscal policy to reinforce County Government’s commitment to responsible financial management practices as outlined in the Public Finance Management Act 2012. The County government remains steadfast in implementing sound fiscal policies to create the necessary conditions for enhanced economic prosperity. The policies focus on critical development programmes in livestock management and crop productivity, water resource management, health services, ECDE and vocational development, roads and infrastructural development and tourism and cooperative development. In addition, the County is putting up strategies to improve revenue collection as well as consider external resource mobilization to finance development programmes as outlined in County Integrated Development Plan (CIDP) 2023-2027. The County’s fiscal policy for the FY 2023/24 budget and over the medium term aims at: i. Reducing recurrent expenditure to devote more to development; ii. Expanding investment inflows by encouraging private sector investments; iii. Ensuring a balanced budget is maintained; iv. Reforming expenditure management and revenue administration; and v. Productivity reforms of the public sector to improve value for money in service delivery. 29 | P a g e 5.2 County Fiscal Framework Medium-Term Fiscal Framework is aims at stimulating sustainable socio- economic growth and development while achieving a balanced fiscal policy. The main objective is to support speedy investment and effective delivery of public goods and services in a sustainable manner. The overall budget deficit is expected to remain at zero in the short term. In the long term, however, efforts will be made to maintain the budget deficit at less than a figure approved by the County assembly of total expenditure to secure fiscal sustainability. The fiscal policy will be achieved through the County Government’s commitment in ensuring a strong revenue base. The measures to achieve this is already contained in the County Finance Act, 2015 and is in line with the best practices that will help improve compliance in payment, minimize delays, and strive towards the revenue potential of the County. Further, the County treasury will develop and implement initiatives that will rationalize existing tax incentives, expand the tax base and eliminate the possibility of revenue leakages. 5.2.1 Observing Fiscal Responsibility Principles The County Government knows that the fiscal position it takes today will have implications in the future. Therefore, in line with the Constitution and the Public Finance Management (PFM) Act of 2012, the principle of sharing the burdens and benefits of the use of resources between the present and future generation implies that we must make prudent policy decisions. The ratio of development to recurrent expenditure will be at least 30:70 over the medium term, as set out in the law. In order to address the risks associated with wage bill and other operational and expense crowding out development, the proportion will be managed in a manner that it should decrease or remain constant as the total expenditure increases. To ensure that the County Government get competitive rates for goods and services from its suppliers, payments shall be made on timely basis to nurture confidence and creditworthiness. The County Government is also guided by Article 201 of the Constitution of Kenya that provides the public finance principles to be followed that include openness, accountability and public participation in financial matters. In this regard the County will involve the Public in developing priority programmes/projects for implementation. 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 County plans to raise its revenue through efficient collection methods, widening of revenue base, and applying reasonable revenue rates. It is therefore 30 | P a g e 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. 5.2.2 Fiscal and Public Financial Management Reforms The County Government shall strengthen enforcement and restructure the organizational structure of finance department to enhance collection of revenues. Revenue automation will be applied to all key revenue collection points. Reforms in policy, planning and budgeting will focus on strengthening data collection/analysis and reviewing budget procedures to ensure budget formulation process is appropriately integrated with planning. The County Government will undertake several measures in improving revenue and expenditure performance. These include modernizing revenue administration infrastructure to ensure efficient and effective service delivery. The County will continue with 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). To ensure full stakeholder participation, transparency and accountability, and adherence to the PFM Act on budget process, public consultation shall be ensured on all matters of planning and budgeting. 5.3 Budget Framework for 2023/24 The budget framework for financial year 2023/24 targets strategic priorities outlined in the ADP for financial year 2023/24 and CIDP 2023-2027. The County Government will continue to re-direct most of its expenditure from non-core recurrent items to finance development activities. During the medium term, the County Government will continue to diversify its revenue sources with great emphasis on developing new revenue streams. Public Private Partnerships (PPPs) will be encouraged in order to create fiscal space, which is important for development. 5.3.1 Revenue Forecasts The total revenue projection estimate for the financial year 2023/24 is Ksh.5,333,489,886. This is in line with figures provided in the Budget Policy Statement (BPS). The figures will be amended once the County Allocation of Revenue Bill and the grants bill are enacted. Currently the county grants bill which was supposed to guide the distribution of grants for financial year 2023/24 amongst all counties has not yet been tabled to the Senate. This CFSP will be updated once we get the full information. 31 | P a g e 5.3.2 Expenditure Forecasts To fully implement the expenditure forecast by sectors for the financial year 2023/24, the expenditure forecast for priority programmes in the financial year 2023/24 stands at Ksh.5,333,489,886 comprising of a recurrent expenditure forecast of Ksh.3,754,872,578 and development expenditure forecast of Ksh.1,578,617,308. Both recurrent and development expenditure forecasts over the medium term are presented in table 10 and 11 respectively. The resources that the County will require to implement priority programmes in the Annual Development Plan, 2023/24 will be partly met through the Medium-Term Expenditure Framework (MTEF) budget. The projected revenue target for the Financial Year 2023/24 is Ksh.5,333,489,886 against the total sector expenditure projections of Ksh.5,333,489,886. Given that the County will be operating within a tight budgetary framework, full realization of the strategic objectives as outlined in the County Annual Development Plan, 2023/24 will largely depend on the goodwill of other development partners. 5.3.2.1 Recurrent Expenditure Forecasts The table below provides the recurrent expenditure forecast by sectors over the medium term (Financial Year 2023/24 to Financial Year 2025/26). Table 10: Departmental Recurrent Expenditure Forecast for FY 2023/24 to 2025/26 DEPARTMENT FY 2022/23 FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 SUPPLEMENTARY I SUPPLEMENTARY II RECURRENT RECURRENT RECURRENT ESTIMATES ESTIMATES PROJECTION PROJECTION PROJECTION RECURRENT RECURRENT RECURRENT RECURRENT RECURRENT COUNTY ASSEMBLY 448,252,680 448,252,680 539,252,680 560,822,787.20 583,255,698.69 OFFICE OF GOVERNOR 327,073,316 344,842,083 202,030,306 210,111,518.24 218,515,978.97 COUNTY PUBLIC SERVICE BOARD 68,800,000 59,282,755 57,000,996 59,281,035.84 61,652,277.27 DEPUTY GOVERNOR 24,900,000 24,900,000 25,500,000 26,520,000.00 27,580,800.00 COUNTY SECRETARY 51,292,234 46,322,234 35,192,234 36,599,923.36 38,063,920.29 DELIVERY UNIT 20,050,207 16,900,583 15,050,207 15,652,215.28 16,278,303.89 COUNTY ATTORNEY 42,500,000 44,200,000.00 45,968,000.00 INTERGOVERNMENTAL 6,000,000 6,240,000.00 6,489,600.00 FINANCE 475,802,507 541,848,597 131,718,459 136,987,197.36 142,466,685.25 SPECIAL PROGRAMMES 191,466,920 372,237,996 125,100,000 130,104,000.00 135,308,160.00 COHESION 33,072,640 32,904,640 22,692,850 23,600,564.00 24,544,586.56 ECONOMIC PLANNING 72,926,773 69,429,453 53,946,773 56,104,643.92 58,348,829.68 REVENUE SERVICES 29,170,000 30,336,800.00 31,550,272.00 ICT AND INNOVATION 10,800,000 11,232,000.00 11,681,280.00 LANDS AND PHYSICAL PLANNING 26,630,000 20,235,000 20,703,060 21,531,182.40 22,392,429.70 ROADS AND INFRASTRUCTURE 16,566,000 13,952,120 13,776,000 14,327,040.00 14,900,121.60 PUBLIC WORKS 21,432,868 19,805,068 11,172,868 11,619,782.72 12,084,574.03 HOUSING AND URBAN 3,000,000 3,120,000.00 3,244,800.00 DEVELOPMENT MUNICIPAL ADMINISTRATION 66,411,310 65,678,869 47,811,310 49,723,762.40 51,712,712.90 AGRICULTURE & IRRIGATION 55,859,377 54,009,377 53,859,377 56,013,752.08 58,254,302.16 LIVESTOCK,VETERINARY 125,807,775 136,112,775 111,543,535 116,005,276.40 120,645,487.46 FISHERY DEVELOPMENT 7,544,240 7,846,009.60 8,159,849.98 EDUCATION AND CDE 229,898,884 242,791,884 164,963,884 171,562,439.36 178,424,936.93 YOUTH AND SPORTS 23,651,991 22,256,827 19,023,991 19,784,950.64 20,576,348.67 CULTURE,GENDER AND SOCIAL 19,104,319 17,958,319 23,297,264 24,229,154.56 25,198,320.74 SERVICES VOCATIONAL TRAINING 4,000,000 4,160,000.00 4,326,400.00 TOURISM AND WILDLIFE 136,281,330 143,076,830 91,781,330 95,452,583.20 99,270,686.53 TRADE AND INVESTMENT 26,176,387 24,666,387 10,264,387 10,674,962.48 11,101,960.98 MSME & COOPERATIVES 8,700,000 9,048,000.00 9,409,920.00 PUBLIC SERVICE MANAGEMENT 238,896,003 182,293,163 379,222,350 394,391,244.00 410,166,893.76 32 | P a g e DEPARTMENT FY 2022/23 FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 SUPPLEMENTARY I SUPPLEMENTARY II RECURRENT RECURRENT RECURRENT ESTIMATES ESTIMATES PROJECTION PROJECTION PROJECTION RECURRENT RECURRENT RECURRENT RECURRENT RECURRENT DEVOLVED UNITS 9,900,615 9,600,615 30,020,000 31,220,800.00 32,469,632.00 CIVIC EDUCATION&PUBLIC 10,053,000 10,455,120.00 10,873,324.80 PARTICIPATION WATER AND SANITATION 61,277,162 59,719,387 47,110,893 48,995,328.72 50,955,141.87 ENVIRONMENT AND CCA 22,706,772 23,457,030 24,881,772 25,877,042.88 26,912,124.60 MINING AND NATURAL RESOURCES 3,300,000 3,432,000.00 3,569,280.00 RENEWABLE ENERGY 4,200,000 4,368,000.00 4,542,720.00 MEDICAL SERVICES 1,347,771,447 1,384,982,068 1,150,496,314 1,196,516,166.51 1,244,376,813.17 PUBLIC HEALTH 218,192,498 226,920,197.97 235,997,005.89 TOTAL RECURRENT EXPENDITURE 4,142,009,517 4,377,516,740 3,754,872,578 3,905,067,481 4,061,270,180 5.3.2.2 Development Expenditure Forecast The table below provides the development Expenditure forecast over medium term (Financial Year 2023/24 to Financial Year 2025/26) Table 11: Departmental Development Expenditure Forecast for FY 2023/24 to 2025/26 DEPARTMENT FY 2022/23 FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 SUPPLEMENTARY SUPPLEMENTARY DEVELOPMENT DEVELOPMENT DEVELOPMENT I ESTIMATES II ESTIMATES PROJECTION PROJECTION PROJECTION DEVELOPMENT DEVELOPMENT DEVELOPMENT DEVELOPMENT DEVELOPMENT COUNTY ASSEMBLY 219,000,000 149,000,000 40,000,000 41,600,000.00 43,264,000.00 OFFICE OF GOVERNOR - - - COUNTY PUBLIC SERVICE BOARD - - - DEPUTY GOVERNOR - - - COUNTY SECRETARY - - - DELIVERY UNIT - - - COUNTY ATTORNEY - - - INTERGOVERNMENTAL - - - FINANCE 387,118,179 392,618,179 40,000,000 41,600,000.00 43,264,000.00 SPECIAL PROGRAMMES 110,000,000 110,000,000 110,000,000 114,400,000.00 118,976,000.00 COHESION - - - ECONOMIC PLANNING 10,000,000 2,748,300 6,000,000 6,240,000.00 6,489,600.00 REVENUE SERVICES 1,000,000 1,040,000.00 1,081,600.00 ICT AND INNOVATION 3,000,000 3,120,000.00 3,244,800.00 LANDS AND PHYSICAL PLANNING 39,000,000 9,000,000 54,080,782 56,244,013.28 58,493,773.81 ROADS AND INFRASTRUCTURE 111,011,424 111,011,424 100,500,056 104,520,058.24 108,700,860.57 PUBLIC WORKS - - - HOUSING AND URBAN DEVELOPMENT 6,000,000 6,240,000.00 6,489,600.00 MUNICIPAL ADMINISTRATION 155,551,108 137,890,180 118,036,430 122,757,887.20 127,668,202.69 AGRICULTURE & IRRIGATION 879,936,385 869,936,385 6,550,000 6,812,000.00 7,084,480.00 LIVESTOCK,VETERINARY 15,193,151 15,060,151 208,544,000 216,885,760.00 225,561,190.40 FISHERY DEVELOPMENT 4,170,000 4,336,800.00 4,510,272.00 EDUCATION AND CDE 17,375,185 13,010,000 105,700,000 109,928,000.00 114,325,120.00 YOUTH AND SPORTS 37,999,944 22,999,944 28,000,000 29,120,000.00 30,284,800.00 CULTURE,GENDER AND SOCIAL SERVICES 7,996,047 7,996,047 27,500,000 28,600,000.00 29,744,000.00 VOCATIONAL TRAINING 22,840,370 23,753,985.16 24,704,144.57 TOURISM AND WILDLIFE 12,000,000 12,000,000 15,000,000 15,600,000.00 16,224,000.00 TRADE AND INVESTMENT 0 - 250,000,000 260,000,000.00 270,400,000.00 MSME & COOPERATIVES - - PUBLIC SERVICE MANAGEMENT 0 - 6,000,000 6,240,000.00 6,489,600.00 DEVOLVED UNITS 7,000,000 3,000,000 5,000,000 5,200,000.00 5,408,000.00 CIVIC EDUCATION&PUBLIC PARTICIPATION - - - WATER AND SANITATION 116,491,804 116,491,804 107,316,619 111,609,283.76 116,073,655.11 ENVIRONMENT AND CCA 47,806,983 29,806,983 166,870,282 173,545,093.28 180,486,897.01 MINING AND NATURAL RESOURCES 2,000,000 2,080,000.00 2,163,200.00 RENEWABLE ENERGY 4,000,000 4,160,000.00 4,326,400.00 MEDICAL SERVICES 145,215,400 80,618,990 55,476,986 57,696,065.44 60,003,908.06 PUBLIC HEALTH 85,031,783 88,433,054.32 91,970,376.49 TOTAL DEVELOPMENT EXPENDITURE 2,318,695,611 2,083,188,387 1,578,617,308 1,641,762,001 1,707,432,481 5.4 Risk Management To ensure fiscal discipline, the County government will have a balanced budget in the Financial Year 2023/24. The County Government will ensure that the allocated resources for spending are commensurate to the revenues expected. The budget will be financed through transfer from the National Government and revenue collected from 33 | P a g e local sources such as fees and charges, rates, among others as allowed by the County Government Acts. The table below gives a breakdown of the various risks, their impact and the mitigation measures to be employed. Table 12: Risk Management over the Medium Term Period Risk Impact Mitigation Pending bills Crippling the County Government’s ability to deliver in Implementing projects in a timely subsequent financial years. manner and adherence to budget lines Reduction in funding Inconsistent rate of infrastructural development in the Enhanced resource mobilization from. County. Late Disbursement of Funds Increased county operating costs and accumulation of Prepare a procurement plan that is in pending bills. sync with the cash flow. Inefficient Utilization of Wastage and slow achievement of the county goals. Full enforcement of existing Resources Government assets management frameworks. Planning and Implementation Inadequate project ownership and sustainability of Restructuring of public participation. Process Risks projects. Untimely approvals of County plans, budgets, Adequate time and consultation for policies and laws. each of the laws, policies, plans and budget. Procurement Lack of developed specifications, inappropriate Enforcing Public Procurement and procurement methods, inadequate preparation of Disposal Act, 2015 tender documents and advertising, improper Designing of implementable work evaluation and selection of firms and individuals, poor plans for execution. negotiations of contract and contract administration. Accounting and Reporting Internal audit oversight and accounting errors. Skilled financial accounting staff with Risks adequate supervision. Regular review of financial statements and approved selection of accounting policies. Technical Risks. Sub-standard quality of infrastructure and systems Strengthening of the design and BQ installation section. Absorptive Risks Delayed delivery of service. Monthly and quarterly implementation reporting of all county projects and programmes. Strict adherence to financial procedures and regulations in project implementation. Performance contracting for County employees. Inadequate Legal Framework Delayed implementation of projects due to litigations Profiling of departments with as a result of loopholes in the legal framework in the institutional legal framework. County institutions. Change Management Risks Implementation of projects outside sector needs and Strengthening of the Sector Working duplication of projects. Groups. Natural calamities Floods and famines resulting in reallocation of budget Establishment of an emergency fund to accommodate the situation. Court cases. Litigations and court injunctions may derail timely Strict adherence to the provisions of execution of the Budget. the law and existing legal frameworks Political risks Delayed approval of bills and laws, hampering legal Continuous engagement with the timelines and implementation of projects and County Assembly. programmes. 34 | P a g e CHAPTER SIX MEDIUM TERM EXPENDITURE FRAMEWORK Overview The FY2023/24 budget and the Medium Term Budget Framework builds on the Isiolo County Governments’ effort to support economic recovery and mitigate against the adverse effects of the severe drought. This will be done by prioritizing implementation of programs outlined in the CIDP (2023-2027). In the view of the limited resources, MTEF budgeting will entail adjusting non priority expenditures to cater for the priority ones. The identified priority sectors will continue to receive more resources. These sectors are required to utilize the allocated resources more efficiently to generate fiscal space to accommodate other strategic interventions. The County Government is committed towards improving access to clean and safe water to all its residents. Increasing share of resources will go to Water sector to increase water availability to households, livestock, and for irrigation project in the County. All other sectors including health, education, and tourism will continue to receive adequate resources in line with our County’s commitment to a balanced sector development to enhance the quality of life for the residents of the County. Resource Envelope The resource envelope projections for the financial year 2023/24 and over the medium term will largely target the transfers from the National Government as provided for by the County Revenue Allocation of Revenue Bill 2023 and the local revenue collection as per the County Finance Act. All the conditional transfers from the National Government are included in the resource envelope for financial year 2023/24. The County will also continue to benefit from grants intended to support health sector service delivery from World Bank and the Republic of Denmark. These funds will be allocated to County Governments based on the criteria specified in the financing agreement between the Government of Kenya and the development partners. The table below shows the resource envelope over the medium term. 35 | P a g e Table 13: Resource Envelope for FY 2023/24 REVENUE Approved Approved Approved Revenue Revenue Revenue Estimates for Supplementar Supplementar Projection For Projection For Projection For FY 2022/2023 y I for FY y II for FY FY 2023/24 FY 2024/25 FY 2025/26 2022/23 2022/23 EQUITABLE SHARE 4,710,388,265 4,710,388,265 4,710,388,265 4,899,041,209 5,095,002,857 5,298,802,972 General Provisions (Equitable 4,710,388,265 4,710,388,265 4,710,388,265 4,899,041,209 5,095,002,857 5,298,802,972 Share) CONDITIONAL ALLOCATIONS 90,800,000 102,000,000 102,000,000 7,025,011 7,306,011 7,598,252 FROM NATIONAL GOVERNMENT Supplement for Construction of 90,800,000 102,000,000 102,000,000 County Headquarters Transfer for Library Service 7,025,011 7,306,011 7,598,252 CONDITIONAL ALLOCATIONS 518,635,657 401,955,171 401,955,171 156,215,486 162,464,105 168,962,670 FROM DEVELOPMENT PARTNERS Current Grants from Foreign 8,937,800 13,642,875 13,642,875 7,738,500 8,048,040 8,369,962 Governments Danida Financing Locally led climate 125,000,000 22,000,000 22,000,000 136,000,000 141,440,000 147,097,600 action world bank UNFPA 12,476,986 12,976,065 13,495,108 Climate Smart Agricultural 330,699,130 259,805,034 259,805,034 Project world bank World bank – emergency locust 44,469,550 84,469,550 84,469,550 response Sweden Agricultural Sector 9,529,177 19,697,797 19,697,797 Development Support Programme (ASDSP) Isiolo County KUSP Account UIG 1,145,356 2,339,915 world bank Isiolo County KUSP Account 1,194,559 UDGworld bank Balanceb/f 1,065,959,923 1,065,959,923 CBK County Revenue Fund 552,945,479 552,945,479 1000171715 CBK Isiolo County Health 22,329,360 22,329,360 Services 1000270721 CBK Isiolo County Fuel Levy 11,424 11,424 1000293427 CBK Isiolo County Village Poly 10,000 10,000 Proj 1000369377 CBK Isiolo County Kenya 270,674,583 270,674,583 Climate Smart Agr 1000371315 CBK Isiolo County Urban 65,320,119 65,320,119 Development 1000392266 CBK Isiolo County Urban 255,182 255,182 Institutional 1000392274 CBK Isiolo County Livestock 243,151 243,151 Support 1000392298 Isiolo County KDSP Account 120,482,795 120,482,795 1000426845 Isiolo County Emergency Locust 28,903,581 28,903,581 Re Account 1000580615 Isiolo County Primary Health 4,784,248 4,784,248 Care 1000580607 danida Sub – Total GROSS COUNTY EXTERNAL 5,319,823,922 6,280,303,359 6,280,303,359 REVENUE ESTIMATES 36 | P a g e REVENUE Approved Approved Approved Revenue Revenue Revenue Estimates for Supplementar Supplementar Projection For Projection For Projection For FY 2022/2023 y I for FY y II for FY FY 2023/24 FY 2024/25 FY 2025/26 2022/23 2022/23 COUNTY OWN SOURCE 113,686,337 180,401,768 180,401,768 271,208,180 187,416,507 194,913,167 REVENUE ESTIMATES GROSS COUNTY REVENUE 5,433,510,259 6,460,705,128 6,460,705,128 5,333,489,886 5,452,189,481 5,670,277,061 ESTIMATES Source: Budget Policy Statement, 2023 Proposed Resource Allocation Prioritization Criteria The resources available will be shared in accordance with the following prioritization criteria: (i) Non-Discretionary Expenditure: This expenditure takes first charge and includes payment of staff salaries and other statutory payments. Personnel emoluments are projected to account for about45 percent of the resource envelope. This is due to non revenue growth accompanied by annual increments, promotions and new recruitments. (ii) Operations and Maintenance: These are resources available to sectors for basic operations and maintenance. This will account for about 25 percent of the non-discretionary expenditures. (iii) Development Expenditure: This will account for 30percent of the projected revenue. Development expenditures will be shared based on the programs that address the County priorities and other strategic interventions as in the 2023, Annual Development plan. The following guideline will be used on the development expenditure: (i) Outstanding Projects: Greater emphasis will be put on the completion of on-going projects. (ii) Strategic Interventions: Priority will be given to policy interventions with high impact on poverty reduction, climate change mitigation and adaptation, environmental conservation, and value chain addition. 6.4 Overall Spending Priorities In finalizing the preparation of the budget for the financial year 2023/2024, the County Government will continue to pursue the policy of limiting less productive expenditures and redirecting resultant savings to capital investment. Effective use of resources will be sought across spending departments and any identified saving will be redirected to deserving priority expenditures. 6.5 Baseline Ceilings The 2022/23 baseline estimates depicts the department’s current spending levels. In the recurrent expenditure category, expenditures on compensation of employee’s accounts for about 43 percent of the resource envelope and it take the first charge. Expenditure on operations and maintenance accounts for 21 percent of the total County 37 | P a g e Resource Envelope. Overall, the recurrent expenditure on compensation to employees and operations and maintenance account for about 64 percent of the projected resource envelope. The balance of 36 percent from total resource envelope is the resources available to fund planned development programmes. The 2023/24 projected estimates depict the department’s current spending levels. In the recurrent expenditure category, expenditures on compensation of employee’s accounts for about 45 percent of the resource envelope and it take the first charge. Expenditure on operations and maintenance accounts for 25 percent of the total County Resource Envelope. Overall, the recurrent expenditure on compensation to employees and operations and maintenance account for about 70 percent of the projected resource envelope. The balance of 30 percent from total resource envelope is the resources available to fund planned development programmes. Table 14: Summary Basis for Setting of Ceilings Estimates Sector Sub Sector Item Classification 2023/24 Estimates (Kshs.) % Total Budget County Assembly County Assembly Recurrent 539,252,680 10.11% Compensation to Employees 247,673,202 4.64% Operations and Maintenance 291,579,478 5.47% Development 40,000,000 0.75% Sub Total 579,252,680 10.86% Sector Total 579,252,680 10.86% County Executive Office of Governor Recurrent 202,030,306 3.79% Compensation to Employees 111,921,686 2.10% Operations and Maintenance 90,108,620 1.69% Development - 0.00% Sub Total 202,030,306 3.79% Intergovernmental Recurrent 6,000,000 0.11% relations and Donor Compensation to - 0.00% coordination Employees Operations and 6,000,000 0.11% Maintenance Development - 0.00% Sub Total 6,000,000 0.11% Office of County Recurrent 42,500,000 0.80% Attorney Compensation to - 0.00% Employees Operations and 42,500,000 0.80% Maintenance Development - 0.00% Sub Total 42,500,000 0.80% CPSB Recurrent 57,000,996 1.07% Compensation to Employees 31,647,996 0.59% Operations and Maintenance 25,353,000 0.48% Sub Total 57,000,996 1.07% County Secretary Recurrent 35,192,234 0.66% Compensation to Employees 8,468,760 0.16% Operations and Maintenance 26,723,474 0.50% Sub Total 35,192,234 0.66% Deputy governor Recurrent 25,500,000 0.48% Compensation to Employees 8,962,848 0.17% Operations and Maintenance 16,537,152 0.31% Sub Total 25,500,000 0.48% Delivery Unity Recurrent 15,050,207 0.28% Compensation to Employees 11,031,840 0.21% Operations and Maintenance 4,018,367 0.08% Sub Total 15,050,207 0.28% Sector Total 383,273,743 7.19% FINANCE, ECONOMIC Finance Recurrent 131,718,459 2.47% PLANNING, REVENUE, Compensation to Employees 76,532,103 1.43% 38 | P a g e Sector Sub Sector Item Classification 2023/24 Estimates (Kshs.) % Total Budget SPECIAL PROGRAMS & Operations and Maintenance 55,186,356 1.03% ICT Development 40,000,000 0.75% Sub Total 171,718,459 3.22% Revenue Sevices Recurrent 29,170,000 0.55% Compensation to 9,170,000 0.17% Employees Operations and 20,000,000 0.37% Maintenance Development 1,000,000 0.02% Sub Total 30,170,000 0.57% Economic Planning Recurrent 53,946,773 1.01% Compensation to Employees 14,370,240 0.27% Operations and Maintenance 39,576,533 0.74% Development 6,000,000 0.11% Sub Total 59,946,773 1.12% Special Programmes Recurrent 125,100,000 2.35% Compensation to Employees 31,000,000 0.58% Operations and Maintenance 94,100,000 1.76% Development 110,000,000 2.06% Sub Total 235,100,000 4.41% ICT and Innovation Recurrent 10,800,000 0.20% Compensation to Employees 6,000,000 0.11% Operations and Maintenance 4,800,000 0.09% Development 3,000,000 0.06% Sub Total 13,800,000 0.26% Peace and Cohesion Recurrent 22,692,850 0.43% Compensation to Employees 6,000,000 0.11% Operations and Maintenance 16,692,850 0.31% Development - 0.00% Sub Total 22,692,850 0.43% Sector Total 533,428,082 10.00% LANDS & PHYSICAL Lands and Physical Recurrent 20,703,060 0.39% PLANNING, ROADS, Planning Compensation to Employees 10,282,020 0.19% URBAN HOUSING Operations and Maintenance 10,421,040 0.20% Development 54,080,782 1.01% Sub Total 74,783,842 1.40% Roads and Recurrent 13,776,000 0.26% Infrastructure Compensation to Employees 9,906,000 0.19% Operations and Maintenance 3,870,000 0.07% Development 100,500,056 1.88% Sub Total 114,276,056 2.14% Public Works Recurrent 11,172,868 0.21% Compensation to Employees 7,898,160 0.15% Operations and Maintenance 3,274,708 0.06% Development - 0.00% Sub Total 11,172,868 0.21% Housing and Urban Recurrent 3,000,000 0.06% Developent Compensation to Employees - 0.00% Operations and Maintenance 3,000,000 0.06% Development 6,000,000 0.11% Sub Total 9,000,000 0.17% Sector Total 209,232,766 3.92% AGRICULTURE, Agriculture Recurrent 53,859,377 1.01% LIVESTOCK & FISHERIES Compensation to Employees 47,332,420 0.89% Operations and Maintenance 6,526,957 0.12% Development 6,550,000 0.12% Sub Total 60,409,377 1.13% Livestock Production Recurrent 111,543,535 2.09% Compensation to Employees 91,952,452 1.72% Operations and Maintenance 19,591,083 0.37% Development 208,544,000 3.91% Sub Total 320,087,535 6.00% Fisheries Recurrent 7,544,240 0.14% Compensation to Employees 4,014,240 0.08% Operations and Maintenance 3,530,000 0.07% Development 4,170,000 0.08% Sub Total 11,714,240 0.22% 39 | P a g e Sector Sub Sector Item Classification 2023/24 Estimates (Kshs.) % Total Budget Sector Total 392,211,152 7.35% EDUCATION & ECDE, Education and Early Recurrent 164,963,884 3.09% VOCATIONAL Childhood Compensation to Employees 153,701,707 2.88% TRAINING, YOUTH, Development Operations and Maintenance 11,262,177 0.21% SPORTS & GENDER Development 105,700,000 1.98% Sub Total 270,663,884 5.07% Technical and Recurrent 4,000,000 0.07% Vocational Training Compensation to Employees - 0.00% Operations and Maintenance 4,000,000 0.07% Development 22,840,370 0.43% Sub Total 26,840,370 0.50% Youth and Sports Recurrent 19,023,991 0.36% Compensation to Employees 7,700,360 0.14% Operations and Maintenance 11,323,631 0.21% Development 28,000,000 0.52% Sub Total 47,023,991 0.88% Gender Culture and Recurrent 23,297,264 0.44% Social Service Compensation to Employees 16,787,280 0.31% Operations and Maintenance 6,509,984 0.12% Development 27,500,000 0.52% Sub Total 50,797,264 0.95% Total 395,325,509 7.41% TOURISM, TRADE, Tourism and Wildlife Recurrent 91,781,330 1.72% MSME, PSM, CEPP & Compensation to Employees 79,939,560 1.50% DEVOLVED UNITS Operations and Maintenance 11,841,770 0.22% Development 15,000,000 0.28% Sub Total 106,781,330 2.00% Trade and Recurrent 10,264,387 0.19% Investment Compensation to Employees 6,503,520 0.12% Operations and Maintenance 3,760,867 0.07% Development 250,000,000 4.69% Sub Total 260,264,387 4.88% MSME and Recurrent 8,700,000 0.16% Cooperatives Compensation to Employees 6,000,000 0.11% Operations and Maintenance 2,700,000 0.05% Development 0.00% Sub Total 8,700,000 0.16% PSM Recurrent 379,222,350 7.11% Compensation to Employees 103,500,350 1.94% Operations and Maintenance 275,722,000 5.17% Development 6,000,000 0.11% Sub Total 385,222,350 7.22% Devolved Units and Recurrent 30,020,000 0.56% Inspectorate Compensation to Employees 20,000,000 0.37% Operations and Maintenance 10,020,000 0.19% Development 5,000,000 0.09% Sub Total 35,020,000 0.66% Civic Education and Recurrent 10,053,000 0.19% Public Participation Compensation to Employees 5,000,000 0.09% Operations and Maintenance 5,053,000 0.09% Development - 0.00% Sub Total 10,053,000 0.19% Sector Total 806,041,067 15.11% WATER, Water and Sanitation Recurrent 47,110,893 0.88% ENVIRONMENT, Compensation to Employees 28,763,320 0.54% NATURAL RESOURCES Operations and Maintenance 18,347,573 0.34% & RENEWABLE ENERGY Development 107,316,619 2.01% Sub Total 154,427,512 2.90% Mining and Natural Recurrent 3,300,000 0.06% Resources Compensation to Employees 0.00% Operations and Maintenance 3,300,000 0.06% Development 2,000,000 0.04% Sub Total 5,300,000 0.10% Renewable Energy Recurrent 4,200,000 0.08% Compensation to Employees 0.00% Operations and Maintenance 4,200,000 0.08% 40 | P a g e Sector Sub Sector Item Classification 2023/24 Estimates (Kshs.) % Total Budget Development 4,000,000 0.07% Sub Total 8,200,000 0.15% Environment and Recurrent 24,881,772 0.47% Climate Change and Compensation to Employees 19,463,040 0.36% Adaptation Operations and Maintenance 5,418,732 0.10% Development 166,870,282 3.13% Sub Total 191,752,054 3.60% Sector Total 359,679,566 6.74% HEALTH SERVICES Medical Services Recurrent 1,150,496,314 21.57% Compensation to Employees 937,641,526 17.58% Operations and Maintenance 212,854,788 3.99% Development 55,476,986 1.04% Total 1,205,973,300 22.61% Public Health Recurrent 218,192,498 4.09% Compensation to Employees 118,024,979 2.21% Operations and Maintenance 100,167,519 1.88% Development 85,031,783 1.59% Sub Total 303,224,281 5.69% Sector Total 1,509,197,581 28.30% MINICIPALITY Municipal Recurrent 47,811,310 0.90% Administration Compensation to Employees 21,000,000 0.39% Operations and Maintenance 26,811,310 0.50% Development 118,036,430 2.21% Total 165,847,740 3.11% Sector Total 165,847,740 3.11% Grand total 5,333,489,886 100.00% Medium Term Expenditure Ceilings 2 The departmental budget ceilings for financial year 2023/24 are as provided in table 16 below. Development expenditure allocations are shared out amongst departments based on the County Integrated Development Plan (CIDP) 2023-27 and Annual Development Plan (ADP) 2023/24 as well as other strategic objectives and policy goals identified in the CFSP. 41 | P a g e Table 15: Medium Term Expenditure Ceilings. FY 2022/23 SUPPLEMENTARY II ESTIMATES FY 2023/24 PROPOSED CEILINGS FY 2024/25 PROPOSED CEILINGS FY 2025/26 PROPOSED CEILINGS RECURRENT DEVELOPMENT TOTALS RECURRENT DEVELOPMENT TOTALS RECURRENT DEVELOPMENT TOTALS RECURRENT DEVELOPMENT TOTALS 448,252,680 149,000,000 597,252,680 539,252,680 40,000,000 488,252,680 560,822,787.20 41,600,000.00 602,422,787.20 583,255,698.69 43,264,000.00 626,519,698.69 344,842,083 344,842,083 202,030,306 - 213,030,306 210,111,518.24 - 210,111,518.24 218,515,978.97 - 218,515,978.97 59,282,755 59,282,755 57,000,996 - 51,945,996 59,281,035.84 - 59,281,035.84 61,652,277.27 - 61,652,277.27 24,900,000 24,900,000 25,500,000 - 25,500,000 26,520,000.00 - 26,520,000.00 27,580,800.00 - 27,580,800.00 46,322,234 46,322,234 35,192,234 - 33,692,234 36,599,923.36 - 36,599,923.36 38,063,920.29 - 38,063,920.29 16,900,583 16,900,583 15,050,207 - 12,050,207 15,652,215.28 - 15,652,215.28 16,278,303.89 - 16,278,303.89 42,500,000 - 42,500,000 44,200,000.00 - 44,200,000.00 45,968,000.00 - 45,968,000.00 6,000,000 - 6,000,000 6,240,000.00 - 6,240,000.00 6,489,600.00 - 6,489,600.00 541,848,597 392,618,179 934,466,775 131,718,459 40,000,000 130,118,459 136,987,197.36 41,600,000.00 178,587,197.36 142,466,685.25 43,264,000.00 185,730,685.25 372,237,996 110,000,000 482,237,996 125,100,000 110,000,000 219,100,000 130,104,000.00 114,400,000.00 244,504,000.00 135,308,160.00 118,976,000.00 254,284,160.00 32,904,640 32,904,640 22,692,850 - 28,292,850 23,600,564.00 - 23,600,564.00 24,544,586.56 - 24,544,586.56 69,429,453 2,748,300 72,177,753 53,946,773 6,000,000 59,226,773 56,104,643.92 6,240,000.00 62,344,643.92 58,348,829.68 6,489,600.00 64,838,429.68 29,170,000 1,000,000 30,170,000 30,336,800.00 1,040,000.00 31,376,800.00 31,550,272.00 1,081,600.00 32,631,872.00 10,800,000 3,000,000 13,800,000 11,232,000.00 3,120,000.00 14,352,000.00 11,681,280.00 3,244,800.00 14,926,080.00 20,235,000 9,000,000 29,235,000 20,703,060 54,080,782 79,323,842 21,531,182.40 56,244,013.28 77,775,195.68 22,392,429.70 58,493,773.81 80,886,203.51 13,952,120 111,011,424 124,963,544 13,776,000 100,500,056 125,276,056 14,327,040.00 104,520,058.24 118,847,098.24 14,900,121.60 108,700,860.57 123,600,982.17 19,805,068 - 19,805,068 11,172,868 13,172,868 11,619,782.72 - 11,619,782.72 12,084,574.03 - 12,084,574.03 3,000,000 6,000,000 9,000,000 3,120,000.00 6,240,000.00 9,360,000.00 3,244,800.00 6,489,600.00 9,734,400.00 65,678,869 137,890,180 203,569,050 47,811,310 118,036,430 166,847,740 49,723,762.40 122,757,887.20 172,481,649.60 51,712,712.90 127,668,202.69 179,380,915.58 54,009,377 869,936,385 923,945,762 53,859,377 6,550,000 60,409,377 56,013,752.08 6,812,000.00 62,825,752.08 58,254,302.16 7,084,480.00 65,338,782.16 136,112,775 15,060,151 151,172,926 111,543,535 208,544,000 321,787,535 116,005,276.40 216,885,760.00 332,891,036.40 120,645,487.46 225,561,190.40 346,206,677.86 7,544,240 4,170,000 11,514,240 7,846,009.60 4,336,800.00 12,182,809.60 8,159,849.98 4,510,272.00 12,670,121.98 242,791,884 13,010,000 255,801,884 164,963,884 105,700,000 245,463,884 171,562,439.36 109,928,000.00 281,490,439.36 178,424,936.93 114,325,120.00 292,750,056.93 22,256,827 22,999,944 45,256,771 19,023,991 28,000,000 54,023,991 19,784,950.64 29,120,000.00 48,904,950.64 20,576,348.67 30,284,800.00 50,861,148.67 17,958,319 7,996,047 25,954,366 23,297,264 27,500,000 47,597,264 24,229,154.56 28,600,000.00 52,829,154.56 25,198,320.74 29,744,000.00 54,942,320.74 4,000,000 22,840,370 22,465,185 4,160,000.00 23,753,985.16 27,913,985.16 4,326,400.00 24,704,144.57 29,030,544.57 143,076,830 12,000,000 155,076,830 91,781,330 15,000,000 109,081,330 95,452,583.20 15,600,000.00 111,052,583.20 99,270,686.53 16,224,000.00 115,494,686.53 24,666,387 - 24,666,387 10,264,387 250,000,000 260,264,387 10,674,962.48 260,000,000.00 270,674,962.48 11,101,960.98 270,400,000.00 281,501,960.98 8,700,000 11,600,000 9,048,000.00 - 9,048,000.00 9,409,920.00 - 9,409,920.00 182,293,163 - 182,293,163 379,222,350 6,000,000 392,122,350 394,391,244.00 6,240,000.00 400,631,244.00 410,166,893.76 6,489,600.00 416,656,493.76 9,600,615 3,000,000 12,600,615 30,020,000 5,000,000 35,000,000 31,220,800.00 5,200,000.00 36,420,800.00 32,469,632.00 5,408,000.00 37,877,632.00 10,053,000 - 8,753,000 10,455,120.00 - 10,455,120.00 10,873,324.80 - 10,873,324.80 59,719,387 116,491,804 176,211,191 47,110,893 107,316,619 161,902,697 48,995,328.72 111,609,283.76 160,604,612.48 50,955,141.87 116,073,655.11 167,028,796.98 23,457,030 29,806,983 53,264,013 24,881,772 166,870,282 191,752,054 25,877,042.88 173,545,093.28 199,422,136.16 26,912,124.60 180,486,897.01 207,399,021.61 3,300,000 2,000,000 6,300,000 3,432,000.00 2,080,000.00 5,512,000.00 3,569,280.00 2,163,200.00 5,732,480.00 4,200,000 4,000,000 9,200,000 4,368,000.00 4,160,000.00 8,528,000.00 4,542,720.00 4,326,400.00 8,869,120.00 1,384,982,068 80,618,990 1,465,601,058 1,150,496,314 55,476,986 1,255,828,300 1,196,516,166.51 57,696,065.44 1,254,212,231.95 1,244,376,813.17 60,003,908.06 1,304,380,721.23 218,192,498 85,031,783 290,124,281 226,920,197.97 88,433,054.32 315,353,252.29 235,997,005.89 91,970,376.49 327,967,382.38 4,377,516,740 2,083,188,387 6,460,705,128 3,754,872,578 1,578,617,308 5,333,489,886 3,905,067,481 1,641,762,001 5,546,829,482 4,061,270,180 1,707,432,481 5,768,702,661 42 | P a g e CHAPTER SEVEN CONCLUSION The CFSP 2023 is prepared as a guiding tool for budget preparation of financial year 2023/24. It is meant to broadly define the expected revenues and expenditure over the medium term as well as propose strategies of financing any anticipated deficit. Isiolo County Government is expected to prepare a balanced budget in financial year 2023/24. The set of policies outlined in the CFSP reflects circumstances that are in line with the fiscal responsibilities as outlined in the PFM Act, 2012. They are also consistent with the County Government strategic objectives pursued as a basis for allocation of public resources. These strategic objectives are provided in the County Government priorities spelled out in the national policies and Isiolo CIDP, 2023- 2027. The adoption of Programme Based Budgeting (PBB) will ensure that all County resources are linked to specific projects outputs and outcomes. The use of the Integrated Financial Management Information System (IFMIS) and the introduction of e-Procurement System will also make it possible for the County to track the resources to results achieved in a more efficient manner. In the budget for the financial year 2023/24, key priority areas are livestock (abattoir), investment in surface and underground water resources, road infrastructure network, Health services, tourism promotion and Education will receive considerate allocation while maintaining reasonable growth on other County sectors. Allocation of funds to these County key priority areas will generally reflect the critical needs of the County residents. It is envisaged that the enhancement of these key areas will drive the County economy up by creating greater supply hence improving the per capita income of households. 43 | P a g e