REPUBLIC OF KENYA COUNTY GOVERNMENT OF NYANDARUA COUNTY TREASURY APPROVED COUNTY FISCAL STRATEGY PAPER FOR 2023/24 FY AND THE MEDIUM TERM THE CHANGE AGENDA FOR SOCIAL- ECONOMIC DEVELOPMENT AND WEALTH CREATION MAY 2023 © County Fiscal strategy paper, 2023 To obtain copies of the document, please contact: Nyandarua County Treasury P. O. Box 701 - 20303 Ol’Kalou, KENYA 2 | P a g e FOREWORD The County Fiscal Strategy Paper (CFSP) 2023 underpins the county fiscal and budget framework by laying out strategic priorities and fiscal policy – that is what the county plans to do regarding revenue, expenditure, and debt management over the medium-term. Importantly, this document sets the sector and program resource ceilings that guide the budget estimates for each sector and program, which are used to set budget projections. It highlights the policy focus for the County Government for implementation in the Financial Year 2023/24 and over the Medium Term. The County is reliant on global and National economic performance while preparing its Fiscal Outlook and Strategy. To this purpose, the County expects that, among other determining variables, both global and national economic performance will promote the implementation of the planned programs and projects while formulating the CFSP. The CFSP is framed against a global economic slowdown underpinned by the ongoing Russia-Ukraine conflict, elevated global inflation, the lingering effects of the COVID-19 pandemic, and persistent supply chain disruptions and the drought effects reversing gains in poverty reduction and inequality, but above all promoting social conflicts. These effects are compounded and amplified by declining manufacturing productivity; skewed access to finance for business and development; rigidities in business regulatory framework that have created urgency on food security and climate change effects. In addition, the drought impacts in the economy has created a strong focus on food security-and climate change. These effects will become dominant in economic management and focusing on its quality and structure. The need to address these constraints and bolster resilience forms the basis of H.E the Governor ‘The Change Manifesto” whose agenda is geared towards economic turnaround and inclusive growth, and aims to achieve this through the Three-Pillar Agenda: The Foundation/Enablers for County Transformation, Economic Pillar and the Social Pillar. These pillars further cascade down to ten focal areas envisaged to have the largest impact and linkages to the economy as well as on household welfare. The implementation of these interventions is expected to stimulate economic recovery and spur growth of the County. As part of the economic turnaround plan, the County Government will scale up own source revenue collection efforts to Kshs.750 million in the FY 2023/24 and Kshs.843 million over the medium term. To achieve this, the County Government will undertake a combination of both tax administrative and policy 3 | P a g e reforms including leveraging on technology and enhanced data analytics to enhance revenue and up scaling the technical capacity of the revenue department through skills, technology and additional staffing. The County Government will continue to ensure accountability in public spending to ensure value for money by eliminating non-priority expenditures; establishing of a County Revenue Mobilization and Public Private Partnerships unit for alternative financing of commercially viable projects; and streamlining the initiation, execution, delivery and sustainability of public investment projects. In light of the above fiscal consolidation plan, the expenditure ceilings in this County Fiscal Strategy Paper have been revised to reflect emerging realities. Therefore, Departments programmes for FY 2023/24 have been scrutinized carefully to ensure congruence to the county government’s Change Agenda and the Kenya Kwanza ‘Plan’ Manifesto and the 3rd County Integrated Development Plan and other plans. In this regard, all Departments are expected to prepare their budgets consistent with the Departmental ceilings and adopt the value chain approach under the 10 focal areas to facilitate the finalization of the FY 2023/24 and the medium-term budget proposals. HON. MARY. W. KAMANDE COUNTY EXECUTIVE COMMITTEE MEMBER FINANCE, ECONOMIC PLANNING, AND ICT 4 | P a g e ACKNOWLEDGEMENT The 2023/24 CFSP is prepared in compliance with the provisions of the Public Finance Management Act, 2012. It outlines the strategic priorities of the new Administration, highlights the current state of the economy, provides macro-fiscal outlook over the medium term together with a summary of County Government spending plans as a basis for the FY 2023/24 budget. As we finalize the budget for the FY 2023/24 and the medium term, I wish to emphasize that the economy is operating under fiscal constraints. This has warranted tough choices to ensure that scarce resources are directed towards priority areas of socio- economic transformation. The New Administration's position is that Departments should undertake a scrutiny of individual budget execution reports to curtail growth of recurrent budgets and ensure funding of the new Administration's Change Manifesto. The preparation of the 2023/24 CFSP was a collaborative effort among various stakeholders. We are grateful for their inputs. We thank the Departments and County Government entities for timely provision of information. We are also grateful for the comments received from the participants of the February 2023 Public Sector Hearings and the public which provided invaluable inputs to the 2023/24 CFSP. Finally, we are grateful to the core technical team from the Economic Planning and Development under the guidance of the County Executive Committee Member Finance, Economic Planning and ICT who met and worked tirelessly to prepare and finalize this document. MUIGAI WAINAINA CHIEF OFFICER ECONOMIC PLANNING AND DEVELOPMENT 5 | P a g e CONTENTS FOREWORD....................................................................................................................... 3 ACKNOWLEDGEMENT .................................................................................................... 5 1.0 Overview .................................................................................................................................. 7 1.1 Global and Regional Economic Development .......................................................................... 7 1.2 National Macro-Economic Outlook ......................................................................................... 8 1.3 Domestic Economic Development ............................................................................................ 8 1.4 County Outlook...................................................................................................................... 12 CHAPTER TWO ............................................................................................................... 14 MEDIUM-TERM FISCAL FRAMEWORK ....................................................................... 14 2.0 Overview ............................................................................................................................ 14 2.1 FY 2022/23 First Half-Year Review of Fiscal Performance .................................................. 14 2.1.1 Revenue Performance ........................................................................................................ 15 2.1.2. Expenditure Performance .................................................................................................. 21 2.2 Fiscal Framework for FY 2023/24 and the Medium Term ......................................................... 24 2.2.1. Revenue Projections ......................................................................................................... 24 CHAPTER THREE ........................................................................................................... 25 INDICATIVE MEDIUM-TERM RESOURCE ALLOCATION .......................................... 25 3.0 Overview ................................................................................................................................ 25 3.1 Criteria for Resource Allocation ............................................................................................ 26 3.4 Adherence to Fiscal Responsibility Principles ....................................................................... 33 CHAPTER FOUR.............................................................................................................. 36 ASSUMPTIONS AND RISKS UNDERLYING BUDGETARY AND FISCAL POLICY .... 36 4.0 Overview ................................................................................................................................ 36 4.1 Assumptions ........................................................................................................................... 36 4.2 Risks ....................................................................................................................................... 37 6 | P a g e CHAPTER ONE ECONOMIC OUTLOOK 1.0 Overview This section highlights the global, regional, national, and local economic outlook, and their impact on the county’s economic development. 1.1 Global and Regional Economic Development The global economy refers to the interconnected system of economic activity that takes place across national borders. It encompasses the production, distribution, and consumption of goods and services, as well as financial flows, trade, and investment between countries. The global economy is shaped by a variety of factors, including geopolitical trends, technological innovation, and macroeconomic policies. One of the defining features of the global economy is its interconnectedness. Developments in one part of the world can have significant implications for economic activity elsewhere. For example, a recession in one country can reduce demand for goods and services from other countries, which can lead to decreased trade and investment flows. Similarly, a shock to commodity prices or supply chain disruptions can impact production and consumption patterns around the world. The global economy has experienced significant changes over the past few decades, including the growth of emerging market economies, the expansion of global trade, and the rise of digital technologies. These changes have brought both opportunities and challenges for countries and businesses around the world. The global economic outlook has become more uncertain - shimmering the impact of the ongoing Russia- Ukraine conflict, elevated global inflation, lingering effects of the COVID-19 pandemic and persistent supply chain disruption. Global growth is probable to slow down to 2.9 percent in 2023 from the estimated 3.4 percent in 2022 mainly driven by sluggish growth in advanced economies. The advanced economies are projected to decline from the estimated 2.7 percent in 2022 to 1.3 percent in 2023 reflecting slowdown in the growth in the USA dropping from 2.0% to 1.4%, Euro Area-3.5% to 0.7% and United Kingdom. Growth in the emerging markets and developing economies is projected to rise modestly to 4.0 percent in 2023 from an estimated 3.9 percent in 2022 mainly driven by recovery of activities in China with the full reopening in 2023. China economy is projected to improve to 5.2 percent from 3.0 Percent in 2022. In the 7 | P a g e Sub-Saharan Africa region, growth is projected to remain moderate at 3.8 percent in 2023. This outlook reflects Nigeria’s rising growth from 3.0%in 2022 to 3.2% in 2023 due to measures to address insecurity issues in the oil sector. East Africa is the only region in Africa that avoided a recession in 2022 due to improved agricultural performance, ongoing public spending on massive infrastructure projects and growing regional economic integration. However, political instability in some nations and a lack of economic diversification in others hampered growth. The global economic recovery is expected to help East Africa's GDP expand to 5.4 percent in 2023, up from 4.7 percent in 2022. 1.2 National Macro-Economic Outlook The continued expansion of the Kenyan economy in 2022, albeit at a slower pace than the 7.5 percent recorded in 2021. Real GDP is expected to have grown 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 Bottom – Up Economic Transformation Agenda geared towards economic turnaround and inclusive growth. The overall inflation rate declined for the third consecutive month in January 2023. Inflation rate eased to 9.0 percent in January 2023 from 9.1 percent in December 2022 and 9.5 percent in November 2022 due to a decline in food prices following the favorable rains and declining international prices of edible oils. However, this inflation rate was higher than the 5.4 percent recorded in January 2022. 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. 1.3 Domestic Economic Development According to the Kenya National Bureau of Statistics, the Kenyan economy demonstrated remarkable resilience and recovery from COVID-19 shock due to diversified nature of the economy and the proactive measures by the Government to support businesses. The economy expanded by 7.2 percent in 2021, a much stronger level than the contraction of 0.3 in 2020. 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 8 | P a g e compared to a growth of 2.7 percent and 11.0 percent in similar quarter in 2021. In the third quarter of 2022, the economy grew by 4.7 percent compared to a growth of 9.7 percent in the corresponding quarter in 2021. 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 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 COVID19 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. 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 subsector 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 subsector and construction sub-sector which grew by 4.7 percent and 4.3 percent, respectively. Inflation Rates In accordance to the Kenya National Bureau of Statistics, the year-on-year inflation rate eased for the third consecutive month in January 2023 but was still above the 7.5 percent upper bound target. Inflation rate eased to 9.0 percent in January 2023 from 9.1 percent in December 2022 and 9.5 percent in November 2022 due to a decline in food prices as a result of favorable rains and lower global commodity prices particularly for edible oils and wheat with the easing of international supply chain disruptions. However, this inflation rate was higher than the 5.4 percent recorded in January 2022. Overall annual average inflation increased to 7.9 percent in January 2023 compared to the 6.1 percent recorded in January 2022. Food inflation remained the main driver of overall year-on-year inflation in January 2023, contributing 5.2 percentage points, an increase, compared to a contribution of 3.2 percentage points in January 2022 it was mainly attributed to relatively higher prices key food items. Fuel inflation also increased to contribute 2.4 percentage points to year-on-year overall inflation in January 2023 from a contribution of 1.4 percentage points in January 2022. This was mainly driven by increases in electricity prices due to higher tariffs and increased prices of kerosene/paraffin, diesel and petrol on account of higher international oil prices and scaling down of the fuel subsidy. 9 | P a g e The contribution of core (non-food non-fuel) inflation to year-on-year overall inflation has been low and stable, consistent with the muted demand pressures in the economy, supported by prudent monetary policy. The contribution of core inflation to overall inflation increased to 1.3 percentage points in January 2023 compared to 0.7 percentage points contribution in January 2022. While inflation has been rising and remains high in most economies, Kenya’s inflation rate at 9.1 percent in December 2022 is much lower than that of some countries in the Sub-Saharan African region that have double digits’ inflation. Kenya Shillings Exchange Rate The foreign exchange market has largely remained stable despite the tight global financial conditions attributed to the strengthening US Dollar and uncertainties regarding the ongoing Russian-Ukraine conflict. Due to the strong dollar, the exchange rate to Kenya shilling like all world currencies has weakened to exchange at Ksh123.9 in January 2023 compared to Ksh113.4 in January 2022. Against the Euro, the Kenya shilling also weakened to Ksh133.4 from Ksh128.4 over the same period. In comparison to Sub-Saharan Africa currencies, the depreciation of the Kenya Shilling exchange rate has remained relatively low at 9.3 percent against the US Dollar in January 2023. The stability in the Kenya Shilling was supported by increased remittances, adequate foreign exchange reserves and improved export receipts. 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 and retained at the same rate on 30th January 2023. The interbank rate increased to 6.0 percent in January 2023 compared to 4.4 percent in January 2022 while the 91-day Treasury Bills rate also increased to 9.5 percent compared to 7.3 percent over the same period due to tight liquidity conditions. Commercial banks’ lending rates remained relatively stable in November 2022 supported by the prevailing monetary policy stance during the period. The average lending rate was at 12.6 percent in November 2022 from 12.2 percent in November 2021 while the average deposit rate increased to 7.1 percent from 6.4 percent over the same period. Consequently, the average interest rate spread declined to 5.5 percent in November 2022 from 5.7 percent in November 2021. 10 | P a g e The Stock Market 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 Kshs.1,986 billion from Kshs.2,593 billion over the same period. Balance of Payments In November 2022, the overall balance of payments position improved to a surplus of USD 2,245.4 million (2.0 percent of GDP) 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. According to the Central Bank of Kenya, 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. The balance in the merchandise account declined by USD 1,238.0 million to a deficit of USD 12,186.7 million in November 2022 mainly due to increased payments on imports in spite of an improvement in the export earnings. In the year to November 2022, exports grew by 12.4 percent primarily driven by improved receipts from tea and manufactured goods despite a decline in receipts from horticulture. The increase in receipts from tea exports reflects improved prices attributed to demand from traditional markets. On the other hand, imports of goods increased by 11.7 percent in the year to November 2022 mainly due to increases in imports of oil and other intermediate goods. Net receipts on the services account improved by USD 1,104.3 million to USD 1,678.7 million in November 2022 compared to a similar period in 2021. This was mainly on account of an increase in receipts from transportation and tourism as international travel continues to improve. Net Secondary income remained resilient and increased by USD 417.3 million during the review period owing to an increase in remittances. The balance on the primary account widened by USD 243.0 million to a deficit of USD 1,692.8 million in November 2022, from a deficit of USD 1,449.8 million in the same period last year, reflecting higher interest related payments on other investments. 11 | P a g e Foreign Exchange Reserves The banking system’s foreign exchange holdings remained strong at USD 11,407.7 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. Commercial banks holdings decreased to USD 3,859.2 million in November 2022 from USD 4,196.8 million in November 2021. The official reserves held by the Central Bank in November 2022 represented 4.2 months of import cover as compared to the 5.6 months of import cover in November 2021. It, therefore, fulfilled the requirement to maintain it at a minimum of 4.0 months of imports cover to provide an adequate buffer against short-term shocks in the foreign exchange market. 1.4 County Outlook It's important to recognize that economic stability and growth in any region are influenced by a complex mix of factors, including global economic conditions, national policies, local industry, and demographic trends. In the case of Kenya, the economy is closely tied to the performance of the global economy, which can have a significant impact on the availability of resources, investment flows, and trade. The County's development plans, such as the third Medium Term Plan (MTP IV) of the Kenya Vision 2030, Sustainable Development Goals, and African Union Agenda 2063, are designed to address both the short-term and long-term needs of the region. These plans aim to promote sustainable economic growth, improve access to basic services such as healthcare and education, and create employment opportunities for the local population. It's worth noting that while global economic shocks may not have an immediate impact on the County, it's still important for policymakers and stakeholders to monitor global economic trends and adjust their plans accordingly. Additionally, it's important to ensure that development plans are aligned with the needs and aspirations of the local population, and that there is adequate funding and resources available to implement these plans effectively. The Kenya Kwanza government has the bottom-up policy as its framework to drive change in the society. The bottom-up policy is an economic development strategy proposed by the Kenyan government. The policy is aimed at fostering economic growth and development from the grassroots level by empowering micro, small, and medium enterprises (MSMEs) and promoting entrepreneurship. The central objective of the bottom-up policy is to reduce poverty and inequality by creating job opportunities, increasing 12 | P a g e access to affordable credit, and promoting the growth of MSMEs. The policy aims to achieve these objectives through various initiatives, including: ▪ Providing affordable credit to MSMEs: The Kenyan government plans to establish a credit guarantee scheme that will enable MSMEs to access affordable credit from financial institutions. The scheme is aimed at reducing the high cost of borrowing and promoting the growth of MSMEs. ▪ Developing infrastructure: The Kenyan government plans to develop infrastructure in rural areas to support MSMEs. This includes improving roads, water supply, and electricity access in rural areas. ▪ Promoting local manufacturing: The government plans to promote local manufacturing by providing tax incentives to local manufacturers and establishing industrial parks in various regions of the country. ▪ Expanding markets: The Kenyan government plans to expand markets for MSMEs by creating linkages between small businesses and large corporations, and by promoting exports. The initiatives intimated above are part of the policy direction that the County Government of Nyandarua is to undertake in the implementation of the change agenda in the period FY 2023/24 to FY 2027/28. The four sectors in the county are set to drive change by leveraging the outputs from the productive sector, human resource sector, and infrastructure through seamless operations at the County government. The County machinery program is expected to further the county’s agenda in opening roads and improving accessibility across the county. This is expected to open markets and access to services. Further, the bursary program is to be harnessed to promote school enrollment, transition rates and overall county literacy rates. In the health services, the county is to upgrade sub-county health centers to allow for a strengthened county referral system to efficiently offer health care services. 13 | P a g e CHAPTER TWO MEDIUM-TERM FISCAL FRAMEWORK 2.0 Overview This section presents the framework under which the county government will base its revenue and expenditure plans. For the 2023/24 FY and the medium term, the County Government proposes a series of measures to increase its revenue and balance expenditure. These steps are necessary to ensure the sustainability of the County’s most important public expenditure programmes in the uncertain economic environment. The critical challenge has been finding ways of converting the county’s main economic activities from primary production to value addition which would create more employment and lead to faster growth. The County Government understands the burden of development cannot be carried by the public sector alone, but the private sector must be encouraged to invest and thereby create employment and revenue for the county coffers. Removing obstacles to private investment will therefore continue to remain a priority for the County Government. This Medium-term fiscal framework therefore aims to improve policy coherence, alignment, and coordination across all spending units of the county government. 2.1 FY 2022/23 First Half-Year Review of Fiscal Performance The fiscal performance for the first half of the FY 2022/23 was affected by various factors. Among them was the general elections of August 2022 which saw the change in county administration with the election of new office bearers both at the County Executive and County Assembly levels. The County Government had an approved budget of Kes. 7,839,840,310. Out of this, Kes. 5,191,049,936 (66.21%) was meant for recurrent expenditure while Kes. 2,648,790,374 (33.79%) for development expenditure. In the resource envelope, the national equitable share of Kes. 5,670,444,228 was projected to be the largest source of county revenue accounting for 72.33% of the total resource envelope. Conditional loans and grants from the National Government and its development partners of Kes. 671,542,852 were projected to account for 8.57% of the envelope, county-own-source revenue of Kes. 660,000,000 was to account for 14 | P a g e 8.42% of the envelope and balance brought forward from FY 2021/22 of Kes. 837,853,230 was to account for 10.69% of the resource envelope. 2.1.1 Revenue Performance For the period July- December 2022, the County government received total revenue amounting to Kes. 3,031,995,866 out of the Kes. 7,839,570,310 planned for the year (inclusive of balance brought forward from FY 2021/22). This represents 39% of the projected annual revenue. Of the planned revenue for the financial year 2022/23, receipts from equitable share amounted to Kes. 2,324,882,138 while amounts received from balance brought forward from FY 2021/22 and own source revenue amounted to Kes. 543,505,102 and Kes. 163,607,626 respectively. Revenue performance of the equitable share was 41% while that of balance brought forward from FY 2021/22 and own source revenue was 65% % and 25% respectively. During the period under review, the county had zero receipts from conditional loans and grants. Receipts from equitable share comprised the largest share of total receipts (77%) while those from the balance brought forward from FY 2021/22 and own source revenue comprised 18% and 5% respectively. The revenue receipts are as summarized in Table 1. 15 | P a g e Table 1: County Revenue Receipts for the period from July to December 2022 Revenue source FY 2022/23 Revenue received Revenue received Revenue received Revenue (July-December by source as a by source as a Estimates 2022) proportion of the proportion of estimate total receipts Equitable share 5,670,444,228 2,324,882,138 41% 77% Own source revenue 660,000,000 163,607,626 25% 5% Conditional grants 671,542,852 - 0% 0% Other receipts 837,583,230 543,506,102 65% 18% (unreleased balances for 2021/22FY) Total 7,839,570,310 3,031,995,866 39% 100% Source: County Treasury Revenue received by source as a proportion of total receipts Equitable share 0% 18% 5% Own source revenue 77% Conditional grants Other receipts (unreleased balances for 2021/22FY) 2.1.1.1 Analysis of Own Source Revenue Performance The analysis of revenues generated from the County’s own local sources is as indicated in Table 2. 16 | P a g e Table 2: Analysis of Revenue by Stream, Target, and Actual Collection Revenue source Annual Target July August Septembe October November December Total % 2022/2023 r Reali zed Health services J.M. Hospital 120,000,000 9,826,210 6,134,841 10,755,443 6,703,253 22,021,897 6,468,925 61,910,569 52 Engineer hospital 30,000,000 1,263,315 1,457,106 1,303,368 4,237,545 1,478,164 1,349,947 11,089,445 37 N.H.I.F fee/insurance 30,000,000 2,457,160 2,098,320 1,156,431 2,431,643 8,944,668 3,033,810 20,122,032 67 Public health fees 9,000,000 240,500 235,300 861,100 332,600 277,400 206,500 2,153,400 24 Grave fees 30,000 3,400 1,000 2,900 1,100 1,000 2,500 11,900 40 Medical certificate fees 1,000,000 49,500 48,000 61,500 85,500 113,500 43,000 401,000 40 Water, Environment, Tourism and Natural Resources Conservancy 1,000,000 1,800 2,500 5,700 3000 2,100 300 15,400 2 Exhauster and exh. Milage 1,000,000 0 0 2,700 7,000 7000 16,700 2 Water fee 500,000 4,278 7,023 6,121 8,249 9,590 19,389 54,650 11 Hire of water tanker 350,000 0 0 0 0 0 0 0 - Dumping fee 100,000 0 0 0 0 0 0 0 - Park entrance fee 10,000 0 0 0 0 0 0 0 - Logging fees 2,500,000 49,920 27,120 30,840 27,240 28,030 21,500 184,650 7 Sale of trees - 70,000 70,000 Hire of stadium - 12,000 12,000 Noise control - 2,000 2,000 Public Administration & ICT Impounded fees 5,000,000 4,100 4,350 79,150 83,640 45,130 91,600 307,970 6 Storage fees 50,000 0 0 12,690 1350 810 1,620 16,470 33 Motorcycle penalty 2,500,000 0 0 12,950 21,700 1,700 116,900 153,250 6 Betting 50,000 0 0 - - - Land, Housing & Physical Planning Plot rates 25,000,000 246,355 207,431 258,326 192,272 218,147 212,471 1,335,002 5 Land rates 20,000,000 75,831 40,301 98,148 75,467 181,149 57,452 528,348 3 Market stall rent 2,500,000 131,200 108,000 228,600 134,300 163,600 153,000 918,700 37 Ground rent/kiosk rent 3,500,000 20,600 2,500 25,700 49,500 18,700 10,000 127,000 4 17 | P a g e House/office rent 1,500,000 50,300 91,770 75,650 103,450 61,250 77,400 459,820 31 Sub-division of land 9,000,000 319,500 192,500 303,500 434,500 231,500 210,500 1,692,000 19 Building plan inspection 600,000 11,500 9,500 87,425 11,500 13,500 7,100 140,525 23 fee Site indication 50,000 0 500 500 500 1,500 3 Change of user 4,000,000 87,500 77,000 136,000 76,500 95,500 58,500 531,000 13 Land/plot reg. Fees 1,000,000 7,650 4,050 14,200 3,600 9,450 8,810 47,760 5 Dev. (PPA forms) 3,000,000 30,600 25,200 40,200 28,800 31,200 25,800 181,800 6 App. Of building plans 15,000,000 453,989 476,334 146,068 517,904 400,613 462,259 2,457,167 16 Transfer fees 4,000,000 85,500 112,000 117,000 74,500 108,000 98,050 595,050 15 Clearance certificate 4,500,000 111,000 138,000 162,000 160,000 123,000 119,400 813,400 18 Hire of hall/chairs 10,000 0 0 2,500 1,500 2,500 6,500 65 Survey fees 3,000,000 0 0 - - - Lease extension 3,000,000 11,500 0 - 11,500 22,900 11,500 57,400 2 Search fee 2,000 0 0 - - - Certificate of compliance 1,500,000 68,000 48,000 66,500 70,000 57,000 68,700 378,200 25 Advertisement 13,500,000 125,611 281,305 75,800 104,850 317,873 8,860 914,299 7 Wayleave - 0 10,000 - 10,000 Imprest surrender/salary - 252,342 237,131 489,473 rec. Road, Transport & Infrastructure Bus and matatu fees 14,393,000 767,600 662,300 793,900 767,850 925,950 965,030 4,882,630 34 Motorcycle fees (parking) 8,500,000 189,100 101,800 290,050 280,400 511,800 653,850 2,027,000 24 Town parking fee 1,500,000 62,250 40,400 45,720 44,050 53,960 43,600 289,980 19 Project management fee 30,000,000 660,013 0 544,506 212,094 36,142 747,983 2,200,738 7 Disposal of assets - 0 0 - - Fire certificate 1,500,000 7,750 1,500 16,000 4,000 750 750 30,750 2 Trade, Industrialisation & Cooperatives Single Business Permits 110,000,000 946,303 775,917 1,309,365 1,144,647 819,523.50 506,486 5,502,241 5 SBP penalties 3,000,000 63,422 39,843 168,844 156,207 54,486.50 77,793 560,594 19 Sale of 2,000,000 55,150 29,050 79,172 58,655 57,750 19,600 299,377 15 application/renewal Open air market fees 15,000,000 980,218 815,780 890,263 941,305 900,700 833,980 5,362,246 36 Change of business 300,000 4,500 - 1,000 500 6,000 2 18 | P a g e Weights and measures 1,500,000 0 0 - 96,720 85,380 182,100 12 Cooperative audit fees 1,000,000 0 0 26,215 71,260 97,475 10 Education, Culture, Gender, and Social Services Reg.and renewal of groups 5,000 0 0 1,350 1,800 3,150 6,300 126 Liquor 60,000,000 9,047,294 191,520 316,655 200,680 229,300 1,310,630 11,296,079 19 licence/inspection/app Agriculture, Livestock and Fisheries Cattle dips 250,000 6,990 3,225 2,335 5,595 6,012 6,505 30,662 12 Produce cess royalties 58,000,000 3,609,450 2,452,960 2,705,860 2,958,750 3,210,215 2,631,820 17,569,055 30 Slaughter fees 2,000,000 44,360 39,650 40,250 38,750 34,750 43,890 241,650 12 Hire of 2,500,000 64,000 57,000 134,000 85,000 74,500 85,860 500,360 20 machines(agriculture) Meat inspection 7,000,000 358,750 402,640 353,440 352,585 335,570 383,980 2,186,965 31 Vet department (ai 5,000,000 195,816 160,494 188,254 158,304 220,991 923,859 18 services) Vaccination 4,000,000 0 0 5,000 5,000 0 C.O. T 300,000 9,920 10,000 44,340 15,640 21,870 23,700 125,470 42 Movement permit 300,000 18,910 14,460 8,690 20,550 12,880 14,650 90,140 30 ATC Njabini 300,000 24,000 8,000 12,500 30,500 15,000 41,700 131,700 44 ATC Ol’joro’Orok 1,500,000 113,530 41,200 31,510 35,920 46,855 32,310 301,325 20 Fisheries 100,000 0 0 - 434,152 434,152 434 Motorcycle mortgage fees - 0 0 29,000 68,700 16,700 114,400 Subsidized fertilizer sale 12,000,000 0 0 - - - Reg. Of transporters (Agri) 250,000 2,000 0 - 1,000 3,000 1 Shamba rent 50,000 0 - - - Grand Total 660,000,000 32,968,144 17,687,689 24,237,229 23,923,207 43,092,788 21,698,571 163,607,626 25 19 | P a g e From the foregoing presentation in table 2, Kes. 74,893,062 was collected in the first quarter and Kes. 88,714,566 collected in the second quarter. Consequently, only 25% of the projected annual target for own source revenue was met in the first half of 2022/23 FY. 2.1.1.2. Analysis of Equitable Share Receipts The County received Kes 2,324,882,138 as part of its equitable share. This was 29.65% of the projected annual revenue from this source as tabulated in Table 3. Table 3: Equitable Share Exchequer Releases Annual Estimates Amount Received % Received FY2022/23 July-December 2022 7,839,840,310 2,324,882,138 29.65% 2.1.1.3. Analysis of Conditional Grants Receipts In the first half of the 2022/23FY, no mount was received by the County Government as conditional grant. Table 4: conditional grant Releases Grant Approved Amount % Annual received. Received Estimates (July- FY 2022/23 December 2022) Supplement for Construction of County Headquarters 90,800,000 0 0 Conditional Grant Leasing of Medical Equipment 110,638,298 0 0 World Bank Kenya Climate Smart Agriculture Project 289,609,680 0 0 (KSCAP) EU Grant - IDEAS 11,000,000 0 0 Conditional Grant Leasing of Medical Equipment 10,271,800 0 0 World Bank Financing Locally Led Climate Action 125,000,000 0 0 Sweden - Agricultural Sector Development Support 8,725,383 0 0 Programme World Bank - Kenya Informal Settlement Improvement 25,497,691 0 0 Project Total 671,542,852 0 0 20 | P a g e 2.1.2. Expenditure Performance In the first half year period, the county government’s total expenditure was Kes. 2,375,589,187 representing 30.30% absorption rate. The absorption rate for recurrent budget was higher at 41.71%. This is occasioned by personnel emoluments. The absorption rate for development budget was 7.95% and was mostly incurred in the payment of pending bills. Due to the changes in administration occasioned by the general elections and the subsequent handing over, the planned development projects had not taken off in the first half of the year. This partly explains the low absorption rate for the development budget in that period. Table 5: FY 2022/23 First Half-year Expenditure Performance Expenditure category Approved Actual expenditure Absorption rate % Estimates July-December 2022 Recurrent 5,191,149,936 2,164,975,788 41.71 Development 2,648,790,374 210,613,399 7.95 Total 7,839,840,310 2,375,589,187 30.30 2.1.2.1 Departmental Expenditure Performance The analysis of expenditure for the period July-December 2022 per department is as presented in table 6. Table 6: First Half-Year Departmental Expenditure (2022/23FY) Department Approved Total Absorption Budget Expenditure Rate (%) Estimates July-December FY 2022/23 2022 Office of the Governor 131,648,320 35,474,349 26.95% Office of the County Secretary 2,435,128,413 1,217,429,239 49.99% Office of the County Attorney 34,550,000 1,531,146 4.43% Public Administration & ICT 47,260,926 14,902,768 31.53% County Public Service Board 25,250,000 9,691,282 38.38% Finance and Economic Development 538,803,307 238,528,308 44.27% Health Services 923,229,630 243,948,889 26.42% Education, Culture and the Arts 186,435,830 13,347,917 7.16% Industrialization, Trade, Co-Operatives & 131,957,246 17,636,318 13.37% Urban Development Youth, Sports, Gender Affairs and Social 157,453,856 23,287,745 14.79% Services 21 | P a g e Department Approved Total Absorption Budget Expenditure Rate (%) Estimates July-December FY 2022/23 2022 Water, Environment, Tourism and Natural 545,502,619 15,881,079 2.91% Resources Lands, Housing and Physical Planning 116,571,480 10,199,585 8.75% Transport, Energy and Public Works 1,041,166,628 64,299,193 6.18% County Assembly 921,747,686 401,280,640 43.53% Agriculture, Livestock and Fisheries 549,431,679 60,581,101 11.03% Ol’Kalou Municipality 53,702,691 7,569,628 14.10% Total 7,839,840,310 2,375,589,187 30.30% 2.1.2.1.1 Analysis of First Half-Year Departmental Recurrent Expenditure The Office of the County Secretary had the highest absorption at 49.99% mainly because houses the payroll section responsible for payment of personnel emoluments. The County Assembly ranks second with an absorption rate of 46.87% mainly because of payment of personnel emoluments. The department of Finance and Economic Development ranks third with absorption rate of 44.24%. This can be explained by the fact that all county funds are domiciled in this department. In this regard there was significant expenditure from the bursary fund in October 2022. The expenditures for the rest of the departments were on office operations and maintenance as presented in table 7. Table 7: FY2022/23 First Half-Year Departmental Recurrent Expenditure Analysis Department Approved Recurrent Total Absorption Budget Estimates Recurrent Rate (%) FY 2022/23 Expenditure 1st half-year Office of the Governor 131,648,320 35,474,349 26.95% Office of the County Secretary 2,435,128,413 1,217,429,239 49.99% Office of the County Attorney 34,550,000 1,531,146 4.43% Public Administration & ICT 46,260,957 14,902,768 32.21% County Public Service Board 25,250,000 9,691,282 38.38% Finance and Economic 520,582,183 230,307,184 44.24% Development Health Services 588,627,951 170,137,932 28.90% Education, Culture and the Arts 76,340,122 13,347,917 17.48% Industrialization, Trade, Co- 40,907,365 10,265,546 25.09% Operatives & Urban Development 22 | P a g e Department Approved Recurrent Total Absorption Budget Estimates Recurrent Rate (%) FY 2022/23 Expenditure 1st half-year Youth, Sports, Gender Affairs and 106,657,124 13,287,745 12.46% Social Services Water, Environment, Tourism and 56,412,123 15,881,079 28.15% Natural Resources Lands, Housing and Physical 43,497,271 9,142,377 21.02% Planning Transport, Energy and Public 100,079,820 26,142,343 26.12% Works County Assembly 809,747,686 379,557,227 46.87% Agriculture, Livestock and Fisheries 152,555,601 11,807,930 7.74% Ol’Kalou Municipality 22,805,000 6,069,724 26.62% Total 5,191,049,936 2,164,975,788 41.71% 2.1.2.1.2 Analysis of First Half-Year Departmental Development Expenditure Table 8: FY 2022/23 First Half-Year Development Expenditure Analysis Department Approved Development Total Absorption Budget Estimates Development Rate (%) FY 2022/23 Expenditure 1st half-year Office of the Governor - - 0.00% Office of the County Secretary - - 0.00% Office of the County Attorney - - 0.00% Public Administration & ICT 999,969 - 0.00% County Public Service Board - - 0.00% Finance and Economic 18,221,124 8,221,124 45.12% Development Health Services 334,601,679 73,810,957 22.06% Education, Culture and the Arts 110,095,708 - 0.00% Industrialization, Trade, Co- 91,049,881 7,370,772 8.10% Operatives & Urban Development Youth, Sports, Gender Affairs and 50,796,732 10,000,000 19.69% Social Services Water, Environment, Tourism and 489,090,496 - 0.00% Natural Resources Lands, Housing and Physical 73,074,209 1,057,208 1.45% Planning Transport, Energy and Public 941,086,808 38,156,850 4.05% Works 23 | P a g e Department Approved Development Total Absorption Budget Estimates Development Rate (%) FY 2022/23 Expenditure 1st half-year County Assembly 112,000,000 21,723,413 19.40% Agriculture, Livestock and Fisheries 396,876,078 48,773,171 12.29% Ol’Kalou Municipality 30,897,691 1,499,904 4.85% Total 2,648,790,374 210,613,399 7.95% The overall absorption rate for development budget was 7.95%. The department of finance and economic development had the highest absorption at 45.12%. This was a result of settlement of contractors’ retentions for the year 2021/2022. The expenditure by the other departments was also majorly on settlement of pending bills. 2.2 Fiscal Framework for FY 2023/24 and the Medium Term The third County Integrated Development Plan acknowledges that growth and job creation must be underpinned by a shift from consumption to investment. The projected fiscal framework supports initiatives to improve productivity and competitiveness particularly in core productive sectors and new areas with potential. 2.2.1. Revenue Projections Table 9: FY 2023/24 and the Medium-Term Revenue Projections Revenue FY2021/22 Revenue Projections Actual Reve nues FY2022/23 FY2023/24 FY2024/25 FY2025/26 Equitable Share 5,670,444,228 5,670,444,228 5,905,976,056 6,258,800,000 6,634,352,000 County Own Source 473,061,810 660,000,000 900,000,000 811,200,000 843,648,000 Revenue Other revenues 77,567,516 - - - - (unspent balances b/f) Conditional loans and 1,047,749,163 671,542,852 1,162,944,561 982,000,000 830,000,000 Grants from National Government and Development Partners Total 7,268,822,717 7,001,987,080 7,968,920,617 8,052,000,000 8,308,000,000 24 | P a g e CHAPTER THREE INDICATIVE MEDIUM-TERM RESOURCE ALLOCATION 3.0 Overview This Chapter outlines the Fiscal Framework for the FY 2023/24 as well as the medium term. It also provides an overview of the resource envelope, proposed ceilings as well as expenditures. The strategic priorities for FY 2023/2024 have been drawn from development priorities as set out in the approved CIDP 3 and the approved FY 2023/24 Annual Development Plan. County allocation of resources in the medium term will be geared towards social development and wealth creation. The FY 2023/24 MTEF budget will concentrate on measures to guide the County's transformation, with guidance being provided by the Constitution and other legal tools, the Acts and Regulations. The County planning framework will endeavor to allocate resources to all the sectors equitably. In strengthening the linkage between planning, budgeting and implementation, the Medium-Term Budget framework for the period 2023/24 will sustain the allocation of resources to core programs and subprograms identified in the approved CIDP 3 (2023- 2027). Through the approved Annual Development Plan (ADP) 2023/24 FY, all the County Departments have identified the priority areas with their estimated resource requirements. The Departmental priorities are in line with the Constitution of Kenya under devolved functions, Vision 2030, Fourth National Medium-Term Plan (MTP IV) 2023-2027, Nyandarua CIDP 3 (2023-2027), SDGs, Kenya Kwanza manifesto and the Bottom-up Economic Transformation Agenda (BETA). In a bid to enhance efficiency in revenue collection over the medium term, the County endeavors to automate all its revenue streams. Emphasis will be placed on social sector enablers which will revitalize the County Economy and productivity in alienating the burden of taxation. In addition, through various investment forums and the Region Economic Bloc, the County intends to attract potential Local and Foreign Investors and other Development Partners to assist in the development of the County by creating an enabling environment through legislation of policies aimed at improving the ease of doing business in the County and creating an enabling environment. 25 | P a g e 3.1 Criteria for Resource Allocation Over the Medium Term, the County Government will ensure that resource allocations strive to allocate more resources towards the realization of the social development and wealth creation agenda as well as align the County to the Bottom-up Economic Transformation Agenda (BETA). The resource envelope available for allocation among the spending entities in the County comprises of: 1. Share of National Revenue 2. County Own Source revenue including business permits, property rates, entertainment taxes, levies, fees and charges; and 3. Donor funding (Conditional Loans and Grants). Resource allocation is vital for the advancement of the social development and wealth creation agenda of the County. The considerations include but are not limited to: The “Bottom-up Economic Transformation Agenda” which prioritizes: i. Agricultural Transformations ii. Micro, Small and Medium Enterprise (MSME) iii. Housing and Settlement iv. Healthcare v. Digital superhighway and Creative Industry In addition, resources allocation has also been based on. (i) Development priorities identified in CIDP 3 from the Governor’s change manifesto, the Kenya Kwanza manifesto, MTP IV, sectoral plans and stakeholder’s consultative forums. (ii) Mitigation of Climate change effects on all the key facets of socio-economic development for the county citizenry. (iii) Assumption into the office of a new administration. (iv) A shift of budgetary allocations from a social budget to a more balanced budget factoring both the social and infrastructure development budget. (v) Flagship Projects, The Governor’s Change agenda. 26 | P a g e (vi) Ongoing/phased projects: the emphasis is given to the completion of ongoing and unfinished projects and in particular infrastructure projects and other projects with a high impact on poverty reduction, equity, job and wealth creation. (vii) Job creation: Specific consideration to job creation for the youth based on sound initiatives identified in the Governor’s manifesto and during the county stakeholders’ consultation for the CIDP will be considered as well as disability and gender. Table 10: FY 2023-24 Programme and Departmental Ceilings Department/Programme Recurrent Development Total Ceiling as Ceiling as Programme/ Approved Approved Department Ceiling as Approved Kes. Million Kes. Million Kes. Million Governor’s office Service Delivery unit Coordination 61.00 - 61.00 Liaison & Intergovernmental services 37.50 - 37.50 Governor’s press services 17.50 - 17.50 Total 116.00 - 116.00 County Secretary’s office Administration and Support services (including 48.90 - 48.90 general insurance of Kshs 35M) County Executive Committee Affairs 3.00 - 3.00 Communication and public relations 7.50 - 7.50 Records Management 7.00 - 7.00 Total 66. 40 - 66. 40 County Attorney 37. 50 - 37. 50 County Public Service Board 25. 00 - 25. 00 Public Service, Administration and Devolution Public Service (Including compensation to 2,539.50 - 2,539.50 Employees Gratuity, Pension & Medical insurance) Administration and Devolution 18.00 - 18.00 Enforcement and Compliance 10.00 - 10.00 Total 2,56 7.50 - 2,56 7.50 Finance, Economic Planning and ICT Public Finance Management (Including 19.60 - 19.60 Financial Reporting) Mortgage fund 70.00 - 70.00 Emergency Fund 40.00 - 40.00 27 | P a g e Department/Programme Recurrent Development Total Ceiling as Ceiling as Programme/ Approved Approved Department Ceiling as Approved Kes. Million Kes. Million Kes. Million County Bursary Fund 185.40 - 185.40 Pending Bills - 150.00 150.00 ICT & E-government services 6.00 7.00 13.00 County Budgeting 18.00 - 18.00 Economic Modelling &Research 3.00 - 3.00 Economic Development Planning 7.50 - 7.50 Resource mobilization and debt management 4.00 - 4.00 Monitoring & Evaluation 3.50 - 3.50 County Statistics 7.00 - 7.00 Revenue enhancement & monitoring 21.50 - 21.50 Revenue collection &admin (including 34.50 - 34.50 automation) Supply Chain Management 9.00 - 9.00 Internal Audit and Risk Management 10.00 - 10.00 Total 439 .00 157 .00 596 .00 Education, Children, Gender Affairs, Culture and Social Services Early Childhood Development Education 25.00 33.80 58.80 (ECDE) Vocational Training Development 38.40 19.80 58.20 Culture 5.00 5.73 10.73 Gender, Children and social services 103.99 - 103.99 Alcoholic Drinks Control 7.00 - 7.00 Total 179 .39 59. 33 238 .72 Health Services Health infrastructure and equipment - 137.60 137.60 Preventive and promotive health care 40.66 - 40.66 Solid waste management & cemetery 8.90 3.80 12.70 Healthcare support and management - - - Curative health care (Inclusive of Universal 474.09 - 474.09 Health Coverage) Total 523 .65 141 .40 665 .05 Water, Environment, Climate Change and Natural Resources Water Resource development (including 16.50 189.40 205.90 Irrigation) Climate Change Resilience 11.00 32.00 43.00 Environment Management 9.00 - 9.00 Natural resource 7.50 - 7.50 Total 44. 00 221 .40 265 .40 28 | P a g e Department/Programme Recurrent Development Total Ceiling as Ceiling as Programme/ Approved Approved Department Ceiling as Approved Kes. Million Kes. Million Kes. Million Tourism, Cooperatives Development, Trade and Industrialization Trade Development 12.00 24.40 36.40 Investment Promotion 5.00 15.00 20.00 Industrial development 6.30 506.50 512.80 Cooperative development 12.00 4.00 16.00 Weights & Measures 6.00 - 6.00 Tourism Development and Marketing 11.50 5.00 16.50 Total 52. 80 554 .90 607 .70 Youth Empowerment, Sports and Arts Youth Empowerment 33.00 3.00 36.00 Sports development 33.00 2.00 35.00 Arts development 7.00 - 7.00 Total 73. 00 5.0 0 78. 00 Lands, physical planning and urban development Urban Development 1.50 9.00 10.50 Physical Planning 22.50 - 22.50 Survey and mapping (including GIS) 13.00 - 13.00 Land administration and management 29.00 20.20 49.20 Total 66. 00 29. 20 95. 20 Municipalities Ol’Kalou Municipality 13.00 65.00 78.00 Mairo-Inya Municipality 7.50 5.00 12.50 Engineer Municipality 7.50 5.00 12.50 Total 28. 00 75. 00 103 .00 Public Works, Roads, Transport, Housing and Energy Roads and Transport Development 35.50 437.30 472.80 Energy development 25.00 20.80 45.80 Fire Emergency and Disaster Management Unit 20.00 - 20.00 Public works 7.00 178.30 185.30 Housing development 5.00 3.00 8.00 Total 92. 50 639 .40 731 .90 Agriculture, Livestock and Fisheries Crop development 20.60 501.80 522.40 Agricultural Institutions support to ATCs & 29.00 - 29.00 AMS (including SPPU & Revolving fund) Livestock development 42.80 143.21 186.01 Veterinary services (including subsidized AI) 35.70 2.00 37.70 Fisheries Development 3.50 1.00 4.50 29 | P a g e Department/Programme Recurrent Development Total Ceiling as Ceiling as Programme/ Approved Approved Department Ceiling as Approved Kes. Million Kes. Million Kes. Million Total 131 .60 648 .01 779 .61 County Assembly County Assembly 880.44 115.50 995.94 Grand Total 5,322.78 2,646.14 7,968.92 Table 11: FY 2023-24 and the Medium-Term Departmental Ceilings Department/Programme FY 2024/25 FY 2024/25 FY 2025/26 Ceiling as Projected Projected approved ceilings ceilings Kes. Million Kes. Million Kes. Million Governor’s office Service Delivery unit Coordination 61.00 65.00 70.00 Liaison & Intergovernmental services 37.50 39.00 41.00 Governor’s press services 17.50 18.50 20.00 Total 116.00 122.50 131.00 County Secretary’s office Administration and Support services (including general 48.90 60.00 62.00 insurance of Kshs 35M) County Executive Committee Affairs 3.00 5.00 6.00 Communication and public relations 7.50 15.00 17.00 Records Management 7.00 7.00 8.00 Total 66. 40 87. 00 93. 00 County Attorney 37. 50 87. 50 100 .00 County Public Service Board 25.00 32.00 33.00 Public Service, Administration and Devolution Public Service (Including compensation to Employees 2,539.50 2,700.00 2,850.00 Gratuity, Pension & Medical insurance) Administration and Devolution 18.00 25.00 27.00 Enforcement and Compliance 10.00 14.00 16.00 Total 2,567 .50 2,739 .00 2,893 .00 Finance, Economic Planning and ICT Public Finance Management (Including Financial 19.60 20.00 22.00 Reporting) Mortgage fund 70.00 100.00 100.00 30 | P a g e Department/Programme FY 2024/25 FY 2024/25 FY 2025/26 Ceiling as Projected Projected approved ceilings ceilings Kes. Million Kes. Million Kes. Million Emergency Fund 40.00 50.00 50.00 County Bursary Fund 185.40 180.00 180.00 Pending Bills 150.00 200.00 200.00 ICT & E-government services 13.00 15.00 17.00 County Budgeting 18.00 19.00 20.00 Economic Modelling &Research 3.00 4.00 4.50 Economic Development Planning 7.50 8.00 9.00 Resource mobilization and debt management 4.00 4.00 4.50 Monitoring & Evaluation 3.50 4.00 4.50 County Statistics 7.00 8.00 8.50 Revenue enhancement & monitoring 21.50 23.00 25.00 Revenue collection &admin (including automation) 34.50 37.00 40.00 Supply Chain Management 9.00 10.00 11.00 Internal Audit and Risk Management 10.00 14.00 16.00 Total 596 .00 696 .00 712 .00 Education, Children, Gender Affairs, Culture and Social Services Early Childhood Development Education (ECDE) 58.80 70.00 72.00 Vocational Training Development 58.20 70.00 72.00 Culture 10.73 12.00 13.00 Gender, Children and social services 103.99 100.00 100.00 Alcoholic Drinks Control 7.00 7.50 8.00 T otal 238 .72 259 .50 265 .00 Health Services Health infrastructure and equipment 137.60 220.00 225.00 Preventive and promotive health care 40.66 43.00 45.00 Solid waste management & cemetery 12.70 14.00 15.00 Healthcare support and management - - - Curative health care (Inclusive of Universal Health 474.09 480.00 485.00 Coverage) T otal 665 .05 757 .00 770 .00 Water, Environment, Climate Change and Natural Resources Water Resource development (including Irrigation) 205.90 220.00 225 .00 Climate Change Resilience 43.00 55.00 Environment Management 9.00 12.00 14.00 Natural resource 7.50 8.00 9.00 Total 265 .40 295 .00 248 .00 Tourism, Cooperatives Development, Trade and Industrialization Trade Development 36.40 40.00 45.00 Investment Promotion 20.00 35.00 45.00 31 | P a g e Department/Programme FY 2024/25 FY 2024/25 FY 2025/26 Ceiling as Projected Projected approved ceilings ceilings Kes. Million Kes. Million Kes. Million Industrial development 512.80 20.00 30.00 Cooperative development 16.00 30.00 32.00 Weights & Measures 6.00 7.50 9.00 Tourism Development and Marketing 16.50 30.00 35.00 Total 607 .70 162 .50 196 .00 Youth Empowerment, Sports and Arts Youth Empowerment 36.00 40.00 42.00 Sports development 35.00 90.00 95.00 Arts development 7.00 9.00 11.00 Total 78. 00 139 .00 148 .00 Lands, Physical Planning and Urban Development Urban Development 10.50 15.00 20.00 Physical Planning 22.50 35.00 40.00 Survey and mapping (including GIS) 13.00 20.00 22.00 Land administration and management 49.20 55.00 60.00 T otal 95. 20 125 .00 142 .00 Municipalities Ol’Kalou Municipality 78.00 80.00 85.00 Mairo-Inya Municipality 12.50 25.00 30.00 Engineer Municipality 12.50 25.00 30.00 Total 103 .00 130 .00 145 .00 Public Works, Roads, Transport, Housing and Energy Roads and Transport Development 472.80 500.00 510.00 Energy development 45.80 47.00 48.00 Fire Emergency and Disaster Management Unit 20.00 10.00 12.00 Public works 185.30 130.00 135.00 Housing development 8.00 15.00 20.00 T otal 731 .90 702 .00 725 .00 Agriculture, Livestock and Fisheries Crop development 522.40 530.00 545.00 Agricultural Institutions support to ATCs & AMS 29.00 33.00 40.00 (including SPPU & Revolving fund) Livestock development 186.01 190.00 195.00 Veterinary services (including subsidized AI) 37.70 40.00 50.00 Fisheries Development 4.50 5.00 7.00 Total 779 .61 798 .00 837 .00 County Assembly 995.94 920.00 870.00 32 | P a g e Department/Programme FY 2024/25 FY 2024/25 FY 2025/26 Ceiling as Projected Projected approved ceilings ceilings Kes. Million Kes. Million Kes. Million Grand Total 7,968.92 8,052.00 8,308.00 3.4 Adherence to Fiscal Responsibility Principles In line with the Constitution, Section 107 of the PFM Act, 2012 and regulation 25 of the PFM (County Governments) Regulations, 2015 sets out the Fiscal Responsibility Principles which the County Governments have to adhere to. The law stipulates that: i. The County public debt shall never exceed twenty (20) percent of the County Government's total revenue at any one time. ii. The County Government wages shall be contained at thirty-five (35) percent of the County Government’s total revenue in the Medium Term. iii. The approved expenditures of a county assembly will be as per the senate’s recommendations. This shall not exceed 7% of the total revenues of the County Government or twice the personnel emoluments of that County Assembly, whichever is lower. iv. The County Government actual expenditure on development shall be at least thirty (30) percent of the County Government's total expenditure. v. fiscal risks shall be managed prudently; and vi. A reasonable degree of predictability for the level of tax rates and tax bases shall be maintained, considering any tax reforms that may be made in the future. In the 2023/24 FY and the Medium Term, the County Treasury will ensure that the Budgets are prepared in a way that ensures strict adherence to this principle. Table 12 gives a summary of the indicators on Fiscal Responsibility. 33 | P a g e Table 12: County Fiscal Responsibility Adherence % Share of Indicator Amount (Kes) total Budget Recurrent 5,322,780,000 67 County Expenditure Development 2,646,140,000 33 Total 7,968,920,000 100 County expenditure 2,942,000,000 37 on wages & benefits Expenditure by Recurrent and 995,940,000 12 County Assembly Development Debt financing Development 150,000,000 2 From the analysis presented in table 12, the extent of adherence to the Fiscal Responsibility Principles is as follows: i. The County public debt shall never exceed twenty per cent of the County Government’s total revenue at any one time. In the 2023/24 FY, the County does not plan to borrow externally. The County Government will ensure that all its obligation to the suppliers is met on a timely basis to avoid piling of Pending Bills. The County has allocated resources towards payment of pending bills. ii. County Government’s expenditure on wages and benefits for its public officers shall not exceed thirty-five (35) per cent of the County Government’s total revenue In 2023/24 FY, the County’s expenditure on wages and benefits will account for 37% of the total expenditure. This includes the employees’ pension and gratuity funds and medical schemes. The County is therefore not in line with the set limit of 35% of the County revenues. iii. The approved expenditures of a County Assembly shall not exceed seven per cent of the total revenues of the County Government or twice the personnel emoluments of that County assembly, whichever is lower. The County Assembly’s ceiling accounts for 12% of the total revenues. The allocation is above this fiscal responsibility principle is occasioned by the recurrent expenditure ceiling determined by the Commission on Revenue Allocation (CRA). 34 | P a g e iv. The County Government actual expenditure on development shall be at least thirty per cent. It is projected that the County Government will spend 33% of its Budget on development in 2023/24 FY. This will be mostly on expenditure towards the completion of on-going projects, flagship projects and other service delivery initiatives. This allocation will also be continued over the Medium Term. v. Fiscal risks shall be managed prudently. Fiscal risks will be managed prudently through the establishment of policy, legal and regulatory framework in ensuring prudence in expenditure, contract and asset management. The County will endeavor to implement the County Risk policy. Further, a provision of Kes. 40 million has been factored to cater to urgent and unforeseen expenditures. This will ensure that emergencies can be handled without disorienting the plans and budgets. vi. A reasonable degree of predictability for the level of tax rates and tax bases shall be maintained, considering any tax reforms that may be made in the future. To ensure a reasonable degree of predictability for the level of tax rates, charges and tax bases, legislation on property rates, entertainment tax and produce cess will be amended through the Finance Acts depending on the fiscal strategy each year. The legislation will also contain clear justification for the fees and charges to be charged and the modalities for charging the same. The County Finance Acts will refer to the substantive legislation while proposing amendments to the charges, fees and taxes hence maintaining a degree of predictability. 35 | P a g e CHAPTER FOUR ASSUMPTIONS AND RISKS UNDERLYING BUDGETARY AND FISCAL POLICY 4.0 Overview This chapter provides an assessment of assumptions and risks underlying the budgetary and fiscal policies that the county economy is exposed to that may affect the achievement of targets and objectives detailed in this CFSP. The economy is prone to both internal and external shocks. The capacity to translate policy priorities into the budget, and then to ensure conformity of actual expenditures with the budget, depends in large part on the soundness of projections and revenue forecasts. The risks arise from the assumptions that underlie the definition of targets and instruments in areas such as monetary policy, fiscal policy, exchange rate and trade policy, debt policy, regulation and promotion of private-sector activities, and reform of public enterprises. Emergency of these risks could make it difficult for the government to actualize and sustain the policies detailed in this document. Thus, this section also details measures that the government will implement to mitigate such risks. 4.1 Assumptions Projections are based on critical assumptions about GDP, wage and productivity trends, interest rates and much more. Key social and economic assumptions underlie these projections, including the estimated impact of fiscal trends on national output, prices, and interest rates. The basic assumption that has been applied in this plan is full management and control of Covid- 19 and all related funding support has ceased. Therefore, all economic activities are expected to gradually recover from the effects of the pandemic. This implies that the multiplier effects in the local economy will likely be felt in the course of the year. An increase in economic activity in the County will accelerate the achievement of the targeted revenues and have the County channel the funds meant for Covid-19 management to development programmes. Macroeconomic policies are typically assumed to be "unchanged" over the projection period and based on current fiscal and monetary policies. Interest rates will remain relatively static both in terms of investments and borrowing, inflation is assumed to be moderate and Capital investment 36 | P a g e is proposed to increase substantially given the assumptions around interest rates. The forecasts represent the likely outcomes for growth. The County is highly dependent on revenues from the National Government and Conditional Grants from various Development Partners. To this end, the County expects that all the revenues streams will be released to the County for all the anticipated programmes and projects to take off. To ensure planned and sustainable growth the County Government will continue to synergize its efforts in implementing the socio-economic priority programmes as articulated in the County’s Integrated Development Plan III (2023-2027) and all other relevant policy documents. The County is desirous of ensuring that ongoing programmes and projects are undertaken and completed. Adherence to all the fiscal principles as captured in the Constitution of Kenya 2010, and the PFM Act, 2012 is of the essence in the County operations. All programmes and projects implemented are to also adhere to other legal instruments such as the Procurement and Disposal Act and Regulations among other existing policy guidelines. Disruptive events, such as industrial action, political activities among others are not expected to hinder the implementation of the programmes and projects targeted for the FY 2023/24. 4.2 Risks All projections are subject to uncertainty. This means that events such as natural disasters, wars, pandemics, advancement of technology among others cannot be projected given current information and methods. The risk to the projected outlook for 2023/2024 FY Budget and Medium Term emanate from both external and internal quotas. The County Government in pursuing its goal of improving the livelihoods of the residents through its change Agenda acknowledges that various risks may hinder the fulfilment of its fiscal objectives. The local economy is highly dependent on the performance of the global economy since the National Economy cannot operate as a closed system. An increase in international prices of oil has a direct effect on the national economy and trickles down to the county economy. Random shocks in the global economy will lead to slowed economic activities both nationally and at the county level. The above factors may affect the realization of the 2023/24 plan. 37 | P a g e The National government should develop policies to provide resilience as much as possible to counter the effects of international shocks and setbacks. Agriculture is the backbone of Nyandarua County’s economy. However, the changing climate is having far reaching impacts on agricultural production, which are likely to challenge the sector in future. This is because of global warming. Prolonged droughts may lead to reduced farm produce which affects food security in the country and the county. Reduced agricultural activities will hurt the county’s local revenue which is the major source. It will also result to unemployment as well as under employment since agriculture is the main source of employment in the county. Prolonged heavy rains may lead to crop failure and huge losses to the producers due to impassable roads that link to marketplaces. In addition, heavy rains lead to delay in implementation of projects other projects transforming to low economic growth in the county. The County needs to adopt the growth of drought-resistant crops and fast-growing crops to address the problem of prolonged drought. The timely implementation of development projects during favorable weather conditions should be prioritized. The County Government should invest heavily in drainage systems and water harvesting for irrigation. Unemployment is a great risk factor not just in the county but nationally and is a top potential for economic crisis. The financial, budgetary, and economic effects of unemployment are profound. High levels of unemployment mean that the government’s social spending must be increased, putting further pressure on the county’s budget. With an unemployment rate of 46.3% (KNBS), it means that the county is not using the labor resource efficiently. The price paid by the government is increased social support, health and community support costs and reduction in human capital and productivity. The county government should create employment through adoption of policies that encourage labor intensive methods of production. Nyandarua County is an agricultural county hence investment in the agricultural sector and value addition industries will curb the unemployment. Development of market linkages for agricultural produce is also inevitable. 38 | P a g e Untimely disbursement of funds from the National treasury which is the major source of county resources may impede the implementation of the plan. Low/slow disbursement of donor funds may occur due to the prescribed conditions and funding guidelines on implementation procedures. There is a need for the National treasury to enhance timely releases of funds for the county government to pay the suppliers in good time. This will also help in curbing the problem of huge pending bills and unspent balances at the close of the financial year. Following the 2022 elections, there were political and social tensions stemming from the outcome and change of government. The political intolerance and divisive politics are likely to lower the economic activities in the short-term leading to economic depression. It is a collective responsibility for leaders and citizens to show patriotism and avoid fueling the tension. Any form of protests or go-slows will only serve to hurt the already ailing economy. Considering the existing risks and the level of exposure, the County through the Departments has set into place for implementation of the Risk Policy and mitigation measures. It is expected that the County Emergency Fund will alleviate the emergent issues not captured in the budget. 39 | P a g e