THE REPUBLIC OF KENYA COUNTY GOVERNMENT OF THARAKA NITHI COUNTY BUDGET REVIEW AND OUTLOOK PAPER SEPTEMBER 2022 i © County Budget Review and Outlook Paper (CBROP) 2022 The County Treasury County Head Quarters Tharaka Nithi County P. O. Box 10-60406 KATHWANA Tel: 1513 (Toll-free) Email: countytreasury@tharakanithi.go.ke ii FOREWORD The County Budget Review and Outlook Paper (CBROP) 2022 has been prepared in line with section 118 of the Public Finance Management (PFM) Act 2012 which requires the county government to prepare a budget review and outlook paper in respect for each financial year; and submit it to the County Executive Committee by 30th September. The CBROP 2022 reviews fiscal performance of the county for the FY 2021/22 against the budget appropriation. In addition, it provides information on changes in forecasts as indicated in the County Fiscal Strategy Paper (CFSP) 2022 and how actual financial performance for the previous financial year may have affected compliance with the fiscal responsibility principles, or the county financial objectives for that year. It further gives reasons for any deviation from the county financial objectives in the latest fiscal strategy paper together with proposals to address the deviations. The updated economic and financial outlook presented in this paper sets out the broad fiscal parameters for preparation of the next budget. In particular, the provisional ceilings presented are intended to act as a guide to sector working groups and the departments in preparing their budgets. It is therefore my expectation that the policy paper will be useful in enhancing financial discipline and fiscal responsibilities outlined in section 107 of the PFM Act 2012 and will contribute towards the realization of aspiration of the residents of the county. Ms. DOROTHY I. K NAIVASHA County Executive Committee Member, Finance, Economic Planning and Trade Tharaka Nithi County iii ABBREVIATIONS AND ACRONYMS CBK Central Bank of Kenya CBROP County Budget Review and Outlook Paper CFSP County Fiscal Strategy Paper CG County Government CGTN County Government of Tharaka Nithi CIDP County Integrated Development Plan COMESA Common Market for East and Central Africa CORe County Own Revenue CRA Commission on Revenue Allocation EAC East African Community ECDE Early Child Development Education FY Financial Year GDP Gross Domestic Product IBEC Inter-Governmental Budget and Economic Council ICT Information and Communication Technology IFMIS Integrated Financial Management Information System KNBS Kenya National Bureau of Statistics KMTC Kenya Medical Training College KPLC Kenya Power and Lighting Company LAE Last Annual Estimate MTEF Medium Term Expenditure Framework MTP Medium-Term Plan PE Personnel Emoluments PFM Public Finance Management PPP Public Private Partnership PWD People with Disabilities SWG Sector Working Group USAID United States Agency for International Development (USAID) iv TABLE OF CONTENTS FOREWORD .............................................................................................................................................. iii ABBREVIATIONS AND ACRONYMS ............................................................................................. iv TABLE OF CONTENTS .......................................................................................................................... v LIST OF TABLES ................................................................................................................................... vii LIST OF FIGURES ................................................................................................................................. viii LEGAL BASIS FOR PREPARATION OF CBROP ........................................................................ ix FISCAL RESPONSIBILITY PRINCIPLES IN THE PUBLIC FINANCIAL MANAGEMENT ....................................................................................................................................................................... x SECTION I: INTRODUCTION ............................................................................................................. 1 1.1 Objective of CBROP ...................................................................................................................... 1 1.2 Significance of CBROP ................................................................................................................... 1 1.3 Structure ........................................................................................................................................... 2 SECTION II: REVIEW OF COUNTY FISCAL PERFORMANCE IN FY 2021/22 ................ 3 2.0 Overview .................................................................................................................................... 3 2.1 Fiscal Performance for FY 2021/22............................................................................................. 4 2.2 County Own Revenue Performance and Conditional Grants ............................................. 5 2.2.1 Own Revenue performance ............................................................................................ 6 2.2.2 Conditional Loans and Grants ........................................................................................ 7 2.3 County Expenditure Performance ........................................................................................ 7 2.3.1 Expenditure by economic classification ...................................................................... 8 2.3.2 Recurrent Expenditure by Economic Classification .................................................. 9 2.3.3 Other Development expenditure .................................................................................... 9 2.3.4 Expenditure Performance-Absorption ........................................................................ 10 2.3.5 Implications for the FY 2021/2022 performance ..................................................... 13 SECTION III: RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK ............... 15 3.1 Recent Economic Developments .............................................................................................. 15 3.1.1 World economic outlook ..................................................................................................... 15 3.2 Overview of Recent Economic Developments ...................................................................... 17 v 3.3 Progress Report on Budget Implementation .......................................................................... 18 3.4 County Economic Outlook and Policies ................................................................................. 19 3.5 Medium Term Fiscal Framework .............................................................................................. 21 3.6 Risks to the Outlook ................................................................................................................... 24 SECTION IV: RESOURCE ALLOCATION FRAMEWORK ..................................................... 26 4.1 Adjustment to the Proposed 2022/23 Budget .................................................................. 26 4.2 Medium Term Expenditure Framework .................................................................................. 27 4.2.1 Proposed 2023/24 Budget Framework ............................................................................. 29 4.2.2 Revenue Projections ............................................................................................................. 29 4.2.4 Expenditure Forecasts .......................................................................................................... 32 4.2.5 Recurrent vs Development Budget Expenditure ............................................................ 26 4.2.6 Wage bill ................................................................................................................................. 36 4.2.7 Expenditure Ceilings ............................................................................................................ 36 4.2.8 Projected fiscal Balance (deficit) and likely financing.................................................. 36 SECTION V: CONCLUSION .............................................................................................................. 37 ANNEXURES .......................................................................................................................................... 38 Annex I: Budget Calendar for the FY 2022/23 ............................................................................. 38 Annex II: Revenue Performance per Stream and location ......................................................... 41 vi LIST OF TABLES Table 1: Summary of County Fiscal Performance for FY 2021/22 ................................................. 4 Table 2: Allocation and Actual Expenditure by Type Combined .................................................... 5 Table 3: Allocation and Actual Expenditure Executive and Assembly ........................................... 5 Table 4: Revenue performance by Stream .......................................................................................... 6 Table 5: Summary Release of Conditional Loans and Grants .......................................................... 7 Table 6: Expenditure by Vote ................................................................................................................. 8 Table 7: County Expenditure Performance per Economic Classification ..................................... 8 Table 8: Absorption Rates by Sectors 2021/22 FY .......................................................................... 11 Table 9:Absorption rates by Department 2021/22 FY.................................................................... 11 Table 10: International GDP Growth Estimates and Forecasts (Year-On-Year Percentage Change ....................................................................................................................................................... 22 Table 11: Fiscal Framework (KShs million) ........................................................................................ 23 Table 12: MTEF Revenue projections by source 2023/24-2025/26 ............................................. 29 Table 13 : Revenue and Expenditure Projections 2021/22-2025/26 ............................................ 31 Table 14: Summary of Actual and Projects Expenditure MTEF .................................................... 32 Table 15:Summary of Indicative departmental Ceilings for the MTEF Period 2023/24- 2025/26 ..................................................................................................................................................................... 33 Table 16: Summary of Indicative Sector Ceilings ............................................................................ 34 Table 17 Recurrent and Development Expenditure 2023/24-2025/26 ....................................... 26 vii LIST OF FIGURES Figure 1: Fiscal Performance for FY 2021/22 ........................................................................................... 4 Figure 2: Comparison of recurrent expenditure for FYs 2020/21 and 2021/22. ................................. 9 Figure 3: Revenue Projections FY 2022/23-2025/26 ............................................................................. 30 Figure 4: Pie chart sector ceilings ........................................................................................................ 35 viii LEGAL BASIS FOR PREPARATION OF CBROP The Budget Review and Outlook Paper (CBROP) is prepared in accordance with Section 118 of the Public Finance Management (PFM) Act 2012. The law stipulates that: 1) A county Treasury shall; a. Prepare a CBROP in respect of the County for each year; and b. Submit the paper to the County Executive Committee (CEC) by 30th September of that year. 2) In preparing its CBROP, the County Treasury shall specify; a. The details of the actual fiscal performance in the previous year compared to the budget appropriation for that year b. The updated economic and financial forecasts with sufficient information to show changes from the forecasts in the most recent County Fiscal Strategy Paper (CFSP) c. Information on: (i) Any changes in the forecasts compared with the CFSP; or (ii) How actual financial performance for the previous financial year may have affected compliance with the fiscal responsibility principles, or financial objectives in the CFSP for that financial year; and d. Reasons for any deviation from the financial objectives in the CFSP together with proposals to address the deviation and the time estimated for doing so. ix FISCAL RESPONSIBILITY PRINCIPLES IN THE PUBLIC FINANCIAL MANAGEMENT In line with the Constitution of Kenya 2010, the PFM Act, 2012 sets out the fiscal responsibility principles to ensure prudency and transparency in the management of public resources. Section 107 of the PFM Act, 2012 states that: 1) The County Government’s recurrent expenditure shall not exceed the County Government’s total revenue; 2) Over the medium term, a minimum of thirty (30) per cent of the County Government’s budget shall be allocated to the development expenditure; 3) The County Government’s expenditure on wages shall not exceed a percentage of the County Government’s total revenue as prescribed by the County Executive Member for Finance in regulations and approved by the County Assembly – 35 percent; 4) Over the medium term, the Government’s borrowing shall be used only for purpose of financing development expenditure and not for recurrent expenditure; 5) The County debt shall be maintained at a sustainable level as approved by County Assembly; 6) The fiscal risks shall be managed prudently; and 7) A reasonable degree of predictability with respect to the level of tax rates and tax bases shall be maintained, taking into account any tax reforms that may be made in the future. x SECTION I: INTRODUCTION The County Budget Review and Outlook Paper (CBROP) is prepared in line section 118 of the Public Finance Management (PFM) Act, 2012 and Chapter Five (5) of the County Budget Operations Manual, 2014 that gives guidelines on content and format of CBROP. The paper reviews the actual fiscal performance of the county for the financial year 2021/2022; the updated macro-economic and financial forecasts; deviations from the approved County Fiscal Strategy Paper (CFSP 2022) and sets the sector ceiling for the year 2023/24. 1.1 Objective of CBROP The objective of CBROP is to provide a review of the previous year fiscal performance and how this impacts the financial objectives and fiscal responsibility principles to be set out in 2023 CFSP. This together with macroeconomic outlook provides a basis for adjustments to the current budget for FY 2022/23 in the context of the broad fiscal parameters supporting the next budget and the medium term. Details of the fiscal framework and the medium-term policy priorities will be firmed in the 2022 CFSP. Specifically, the CBROP provides: (i) Updated economic and financial forecasts in relation to the changes from the forecasts in the most recent County Fiscal Strategy Paper (CFSP); (ii) Details of the actual fiscal performance in the previous year compared to the budget appropriation for that particular year; (iii)Any changes in the forecasts compared with the CFSP; (iv) Indication on how actual financial performance for the previous financial year may have affected compliance with the fiscal responsibility principles, or the financial objectives in the CFSP for that financial year; and (v) Reasons for any deviation from the financial objectives in the CFSP together with proposed measures to address the deviation and the time estimated for doing so. 1.2 Significance of CBROP The paper is a policy document and links planning with budgeting. It is significant in the budget making process within the Medium-Term Expenditure Framework (MTEF) as it reviews previous fiscal performance for the year and identifies any deviations from the budget with the aim of providing realistic forecasts for the coming year. It also assesses how fiscal responsibility principles were adhered to as provided in section 107 of the PFM Act 2012. In addition, the updated macroeconomic and financial outlook provides a basis for any budget revision and sets out broad fiscal parameters for the next budget. Further, the paper is expected to provide indicative sector ceilings for the FY 2022/23 budget and in the medium term to guide Sector Workings groups (SWGs) before being affirmed in the CFSP 2022. 1.3 Structure This paper has four other sections. Section Two reviews the county’s fiscal performance for the previous year. It is divided into three sub-sections, namely, the Overview, Fiscal Performance and Implications of Fiscal Performance. Section three reviews recent economic developments and has four subsections: Recent Economic Developments, Economic Outlook & Policies, Medium Term Fiscal Framework and Risks to the Outlook. Section four sets out how the county government intends to operate within its means. It establishes the resource envelop (total revenues) and then allocates these across departments by setting expenditure ceilings for each department. In addition, it has four sub-sections: adjustment to the proposed budget; the medium-term expenditure framework; proposed budget framework; and projected fiscal balance and likely financing. And lastly, section five gives a conclusion of the entire paper. SECTION II: REVIEW OF COUNTY FISCAL PERFORMANCE IN FY 2021/22 2.0 Overview The financial year 2021/2022, being an election year and due to the post-COVID 19 recovery challenges, the budget implementation was hampered by numerous challenges. This subsequently led to slight challenges in fiscal performance during that period in a bid to stabilize the economy and cushion small businesses from the harsh economic times. The fiscal performance was averagely impressive with a decrease in the total revenues from KES 5,554.4 million realized in FY 2020/21 to KES 4,736.9 million for the FY 2021/22 as highlighted in Table 1. Development expenditure was recorded at KES 1,017.0 million of the total development allocation of KES 1,899,154,192 representing a 54 percent performance. The development resources were channeled into major development programmes that had huge socio-economic impacts to the citizens. This includes roads construction, water supply, market development, promoting agriculture and early childhood education school infrastructure development as well as upgrading and operationalizing of health facilities. On recurrent expenditure, the County Government has prioritized the basic expenditures such as payment of staff emoluments, purchase of essential commodities for the health facilities and all other essential services. This aims at optimizing operational and administrative costs and stop any unnecessary expenditures. The measures adopted in the FY 2021/22 budget implementation framework led to a recurrent expenditure of 88 percent amounting to KES 3,135.9 million from a total recurrent allocation KES 3,562.6 million. The county assembly total expenditure (development and recurrent) was KES 400.03 million from a total recurrent allocation of KES 449.4 million translating to 89 percent absorption rate. Given all the disruption during the FY 2021/2022, the general performance can be termed as impressive given the prevailing circumstances. To ensure budget process underscores the need for efficiency and effectiveness of public spending and improving revenue collection to finance public services, as per the PFM Act, 2012, the county government will ensure its expenditure is on priority-basis and revenue is enhanced to ensure its fiscal requirements are adequately met. 2.1 Fiscal Performance for FY 2021/22 During the FY 2021/22, the total County revenue was KES 4,736.9 million comprising of Equitable Share of KES 3,877.1 million, County Own Revenue of KES 239.4 million, Conditional grants of KES 274.9 million and the balances brought forward of KES 345.6 million. At the end of the 2021/22 financial year, there was unspent balance of KES 183.98 million. Table 1 summarizes the revenues realized by the County for the FY 2021/22 Table 1: Summary of County Fiscal Performance for FY 2021/22 Particulars 2020/21 FY 2021/22 FY 2021/22 FY % Actual Approved Actual Performance TOTAL REVENUES 5,554,449,574 5,911,260,701 4,736,939,549 80% Unspent Bal from Previous FY 252,554,178 373,811,941 345,640,185 92% Revenue (Total) 5,301,895,396 5,537,448,760 4,391,299,364 79% Equitable Share Allocation 4,262,115,600 4,214,198,393 3,877,062,704 92% Local Revenue 254,745,602 350,000,000 239,381,562 68% Grants (Total) 785,034,194 973,250,367 274,855,098 28% Total Expenditure 5,554,449,574 5,911,260,701 4,736,939,549 80% Recurrent 3,264,152,002 3,562,693,509 3,135,910,418 88% Development 1,346,399,471 1,899,154,192 1,017,014,705 54% County Assembly 429,024,953 449,413,000 400,032,732 89% Unspent Bal Current FY 514,873,148 - 183,981,694 Revenue and expenditure perfomance 5,911 5,911 6,000 4,737 4,737 5,000 4,214 3,877 4,000 3,5633,136 3,000 1,899 2,000 973 1,017 1,000 374346 350239 275 449400 - Revenue and expenditure 2021/22 FY Approved 2021/22 FY Actual Figure 1: Fiscal Performance for FY 2021/22 Amount (millions) Millions The county total revenues realized for the year were KES 4,736.9 million representing 80 percent of the annual approved revenues of KES 5,911.3 million and a decrease of 17 percent from the previous year (FY 2020/21) total of KES 5,554.5 million. As at the end of the FY 2021/22, the county had an unspent balance of KES 183.98 million compared to KES 345.64 million at the beginning of the 2021/22 financial year. The budget absorption level was at 80% for the year under review with 54% and 88% absorption rates for development and recurrent expenditures respectively, while the County Assembly absorption rate was at 89%. This is as tabulated in table 3 below Table 2: Allocation and Actual Expenditure by Type Combined Particulars 2020/21 FY 2021/22 FY 2021/22 FY % Actual Approved Actual Performance Total Expenditure 4,479,989,745 5,911,260,701 4,736,939,549 80% Recurrent 3,687,251,222 3,987,106,509 3,529,051,532 89% Development 1,352,325,204 1,924,154,192 1,023,906,323 53% unspent balances 514,873,148 183,981,694 Table 3: Allocation and Actual Expenditure Executive and Assembly Particulars 2020/21 FY 2021/22 FY 2021/22 FY % Actual Approved Actual Performance Total Expenditure 5,554,449,574 5,911,260,701 4,736,939,549 80% Recurrent 3,264,152,002 3,562,693,509 3,135,910,418 88% Development 1,346,399,471 1,899,154,192 1,017,014,705 54% County Assembly 429,024,953 449,413,000 400,032,732 89% Unspent Bal Current FY 514,873,148 - 183,981,694 3.9% The expenditure by the County assembly was KES 400.03 million representing approximately 8.4 % of the total County expenditure. This is slightly above the 7% envisioned by the PFM regulations 2015 section 25(1)(f) mainly due to the development allocation for construction of the County assembly offices. 2.2 County Own Revenue Performance and Conditional Grants The total amount of County Own Revenue (CORe) collected in FY 2021/22 was KES 239.38 million constituting a decrease of 6 per cent from KES 254.75 million realized in FY 2020/21. This represents a 31 percent under collection of the annual CORe target of KES 350 million approved in the FY 2021/22 budget. 2.2.1 Own Revenue performance The own sources of revenue slightly decreased to KES 239.38 million from KES 254.75 realized in the FY 2020/2021. The own sources of revenue had 68 per cent performance against the target of KES 350,00,000. This represented a 6 per cent decrease from last financial year’s revenue collection. This is attributed to the disruption of the election activities and depressed economic environment due to poor rainfall over the last three seasons. Table 4 gives a breakdown of the revenue streams. Expounded revenue streams as per location are outlined in Annex II. Table 4: Revenue performance by Stream S Revenue stream Original Budget (Ksh) Actual 2021/22 FY % of Realisation 1 Hospital fees 105,300,000.00 102,726,546.00 98% 2 Single Business Permit 60,500,800.00 43,925,142.00 73% 3 Cess Fee 55,084,200.00 30,257,630.00 55% 4 Liquor Inspection 16,000,000.00 13,374,511.00 84% 5 Vehicle Parking 16,900,390.00 8,309,270.00 49% 6 Veterinary Services 300,000.00 7,628,620.00 2543% 7 Market and Slaughter 20,831,200.00 7,545,149.00 36% 8 Building Plan Approval 5,500,000.00 4,740,567.00 86% 9 Advertisement 4,500,000.00 3,999,000.00 89% 10 House and Stalls 4,700,420.00 3,274,326.00 70% 11 Ground Rent 5,974,900.00 3,089,795.00 52% 12 Public Health Approval 1,000,000.00 1,691,200.00 169% 13 Transfer Application & 800,000.00 952,200.00 119% Adjudication 14 Administration Fees and - 635,096.00 100% Charges 15 Penalties 900,000.00 634,388.00 70% 16 Livestock and Agriculture 500,000.00 519,120.00 104% Produce Cess 17 Search Fees Minutes Ext 250,000.00 380,500.00 152% 18 Miscellaneous 26,000,000.00 321,300.00 1% 19 Mt. Kenya Lodge/Local 978,000.00 276,200.00 28% Tourism 20 Fire Inspection 600,000.00 12,800.00 2% 21 Hire of Halls and Lorry - 0.00 0% 22 Weights and Measures 300,000.00 0.00 0% 23 Medical Examination 17,500,000.00 0.00 0% 24 Physical Planning 3,150,000.00 0.00 0% 25 Cooperative Services 100,000.00 0.00 0% 26 Enforcement Charges 500,000.00 0.00 0% 27 Excavation 150,000.00 0.00 0% 28 Land and Rate 1,680,090.00 0.00 0% Total 350,000,000.00 234,293,360.00 67% 2.2.2 Conditional Loans and Grants The County received KES 432.1 million (including balances from FY 2020/21) in form of loans and grants which includes DANIDA, KSCAP, KDSP, THSUCP, ASDSP, Emergency Locust Response Programme and Kenya Informal Settlement Programme. The failure to disburse most of the loans and grants continue to hamper the smooth implementation of the key projects and programmes funded by the loans and grants with only 44 per cent of the planned budget for grants realized. Table 5 below analyzes conditional grants released in FY 2021/22. Table 5: Summary Release of Conditional Loans and Grants Source of Revenue FY 2020/21 FY 2021/22 2020/21Revise 2020/21 % 2021/22 2021/22 % d Approved Actual Achieve Revised Actual Achieve Estimates Receipts in d Approved Receipts in d Kshs Estimates Kshs 1 UHDSP – DANIDA 11,160,000 11,160,000 100% 8,695,500 4,347,750 50% 2 Compensation for forgone user fees 8,218,119 8,218,119 100% - - 0% 3 Road Maintenance Fuel Levy Fund 115,085,841 115,085,84 100% - - 0% 0 4 Supplement Construction County HQ 76,000,000 - 0% 76,000,000 - 0% 5 THSUCP – WB 101,448,239 101,185,66 100% 83,426,873 32,039,102 38% 7 6 ASDSP – Sweden 12,178,726 11,679,478 96% 35,126,147 5,500,000 16% 7 KCSAP – WB 320,000,850 266,688,82 83% 350,000,00 222,650,26 64% 0 0 5 8 KDSP – WB 182,242,250 182,242,25 100% 137,242,25 137,242,25 100% 0 0 0 9 KUSP - UDG Grant 50,000,000 27,955,676 56% 50,000,000 0 0% 1 KUSP - UIG Grant - - 0% - - 0% 0 1 Youth Polytechnics Grant 60,799,894 60,799,894 100% 0 0 0% 1 1 Leasing Medical Equipment 132,031,277 - 0% 153,297,87 - 0% 2 2 1 Covid 19 Emergency Grant 39,677,000 39,677,000 100% - 0% 3 1 Health Workers Covid Risk 40,470,000 0% - - 200% 4 Allowances 1 Kenya Informal Settlement Programme - 0 0% 20,000,000 20,000,000 0% 5 1 Emergency Locust Response - 0 0% 49,461,725 10,317,981 6 Programme 1 Climate Change Programme - 0 0% 10,000,000 0 7 Total Amount 1,108,842,196 865,162,74 78% 973,250,36 432,097,34 44% 4 7 8 2.3 County Expenditure Performance The total expenditure in the FY 2021/22 amounted to KES 4,553 million against a revised target of KES 5,911 million, representing an underspending of KES 1,358 million (deviation from the total budget). The shortfall in spending was attributed to poor performance in revenue from local sources and conditional grants for both the recurrent and development expenditures. The County Assembly expenditure was KES 400.03 million representing 8.79 percent of the total county expenditure. Table 6: Expenditure by Vote Particulars 2020/21 FY 2021/22 FY 2021/22 FY % Actual Approved Actual Performance Total Expenditure 5,039,576,426 5,911,260,701 4,552,957,855 77% Recurrent 3,687,251,222 3,987,106,509 3,529,051,532 89% Development 1,352,325,204 1,924,154,192 1,023,906,323 53% Recurrent as a % of Total 73.17% 67.45% 77.51% expenditure Development as a % of total 26.83% 32.55% 22.49% expenditure 2.3.1 Expenditure by economic classification The main expenditure classifications are compensation of employees, use of goods and services, grants and other transfers and other development. This is as per the GFS coding system. Table 7 below gives a breakdown of the county expenditure performance per economic classification. Table 7: County Expenditure Performance per Economic Classification DESCRIPTION Actual Revised Actual % Expenditure and Estimates for FY Expenditure and Revenue 2020/21 2021/22 Revenue 2021/22 Total Budget 4,245,770,182 5,911,260,701 4,552,957,855 100.00% Total Recurrent Expenditure 3,309,403,911 4,329,913,617 3,603,170,557 79.14% Compensation to Employees 2,044,509,882 2,235,622,424 2,105,920,482 46.25% Use of Goods and Services 574,138,695 1,163,646,724 884,039,924 19.42% Grants and Other Transfers 690,755,334 930,644,469 613,210,151 13.47% Total Capital Expenditure 936,366,271 1,581,347,084 949,787,298 20.86% Other Development 936,366,271 1,581,347,084 949,787,298 20.86% Financed by: Total Revenue 4,479,904,413 5,911,260,701 4,736,939,549 100.00% Equitable Share 3,587,084,400 4,214,198,393 3,877,062,704 81.85% County Own Revenue [CORe] 271,605,362 350,000,000 239,381,562 5.05% Conditional Grants 529,563,549 973,250,367 274,855,098 5.80% Balance b/f 91,651,102 373,811,941 345,640,185 7.30% Net Financing 234,134,231 - 183,981,694 3.88% 2.3.2 Recurrent Expenditure by Economic Classification The county’s total recurrent expenditure was KES. 3,603.2 million (inclusive of County Assembly allocation) against a target of KES. 4,329.9 million representing an underspending of KES. 726.7 million. The recurrent spending was below target mainly due to lower than targeted absorption on operations and maintenance by KES 279.7 million and for grants and other transfers by KES 317.4 million. Over the same period, spending on wages and salaries was below target by KES 129.7 million. The total recurrent expenditure comprised of KES 2,105.9 million of total recurrent expenditure (58.45%) spent on payment of wages and salaries, KES 884.04 million (24.53% per cent) spent on operations and maintenance and Ksh 613.21 million (17.02%) as grants and transfers. Figure 2 below gives a graphical comparison of the recurrent expenditures for FY 2020/2021 and FY 2021/2022, inclusive of County Assembly allocation. 2021/22 Expenditure and Economic Classification 2,500 2,000 1,500 1,000 500 0 Compensation to Use of Goods and Grants and Other Other Development Employees Services Transfers Economic classification by FY Actual Expenditure and Revenue 2020/21 Revised Estimates for Fy 2021/22 Actual Expenditure and Revenue 2021/22 Figure 2: Comparison of recurrent expenditure for FYs 2020/21 and 2021/22. 2.3.3 Other Development expenditure Other development expenditure for the FY 2021/22 amounted to KES 949.8 million against a revised target of KES 1,581.3 million translating to a shortfall of KES. 631.6 million. This was on account of lower than programed absorption of development expenditure in the financial year. KES millions Millions 2,045 2,236 2,106 574 1,164 884 691 931 613 936 1,581 950 This expenditure represented 21.1 per cent of the total annual expenditure and a slight decrease of 1.4 per cent compared to the expenditure of KES 936.37 million for FY 2020/21. 2.3.4 Expenditure Performance-Absorption The total cumulative departmental expenditure for the FY 2021/22 was Ksh 4,308.7 million (72.89 percent absorption) against a target of Ksh 5,911.3 million. Recurrent expenditure was Ksh3,171.1 million (79.5 percent absorption) against a target of Ksh 3,987.1 million, while development expenditure was Ksh 1,137.5 million (59.1 percent absorption) against a target of Ksh 1,924.2 million. The lower than targeted absorption of expenditures was partly due to the delayed release of funds for the equitable share and the grants for some donor funded projects. As at the end of FY 2021/22, recurrent expenditures by the health sector accounted for 50.6 percent of the total recurrent expenditure. In addition, public administration and agriculture sectors accounted for 27.8 percent and 7.1 percent of total recurrent expenditure, respectively. Analysis of development outlay indicates that roads, transport, and Infrastructure department accounted for the largest share of the total development expenditure (34.2 percent), Agriculture and cooperatives department (24.9 percent), Finance and economic planning department (12.2 percent), department of lands, physical planning, and urban development (11.1 percent) and for the department of health (9.4 percent). Overall, absorption rates by most departments were above 70 percent. This includes county assembly (89.01 percent), administration and public service department (88.45 percent), trade industry and cooperative development 985.59 percent), medical services (81.53 percent), energy and ICT (78.74 percent), roads, transport, and infrastructure (76.68 percent), education and vocational training (76.68 percent) and agriculture (75.44 percent) absorption rates. Table 8: Absorption Rates by Sectors 2021/22 FY SECTOR C-FSP 2021 BUDGET ALLOCATION 2021/22 Cumulative Expenditure 2021/22 Absorption Deviation (%) Recurrent Development Total Recurrent Development Total Recurrent Development Total (%) CFSP - BUDGET Public Admin. 965,083,300 398,769,540 1,363,852,840 1,194,209,796 193,554,635 1,387,764,431 882,947,907 145,719,175 1,028,667,082 74.12% 1.75% Energy And ICT 23,759,380 86,000,000 109,759,380 35,299,095 5,200,796 40,499,891 28,688,038 3,200,796 31,888,834 78.74% -63.10% Infrastructure 103,423,400 300,605,000 404,028,400 198,508,372 496,605,000 695,113,372 143,411,292 389,618,584 533,029,876 76.68% 72.05% Health 1,842,759,100 254,245,700 2,097,004,800 1,872,595,542 352,427,410 2,225,022,952 1,605,264,173 106,654,568 1,711,918,741 76.94% 6.10% Education 248,973,300 70,310,900 319,284,200 260,198,190 69,269,585 329,467,775 173,254,391 59,312,216 232,566,607 70.59% 3.19% General 107,611,500 - 107,611,500 96,471,630 - 96,471,630 82,567,128 - 82,567,128 85.59% -10.35% Economic Agriculture 293,832,034 604,179,260 898,011,294 286,369,820 696,896,766 983,266,586 225,899,432 419,965,955 645,865,387 65.69% 9.49% Environment And 69,639,350 105,000,000 174,639,350 43,454,064 110,200,000 153,654,064 29,106,779 13,059,380 42,166,159 27.44% -12.02% Natural Resources GRAND TOTAL 3,655,081,364 1,819,110,400 5,474,191,764 3,987,106,509 1,924,154,192 5,911,260,701 3,171,139,140 1,137,530,674 4,308,669,814 72.89% 7.98% Table 9:Absorption rates by Department 2021/22 FY MINISTE RIAL C-FSP 2021 BUDGET ALLOCATION 2021/22 Cumulative Expenditure 2021/22 Absorption Deviation D EPARTMENTS (%) REC DEV TOTAL REC DEV TOTAL REC DEV TOTAL (%) CFSP - BUDGET Governor's Office 142,275,700 - 142,275,700 194,885,972 - 194,885,972 109,121,904 - 109,121,904 55.99% 36.98% Finance and 219,519,900 263,769,540 483,289,440 411,622,580 168,554,635 580,177,215 244,284,782 138,827,558 383,112,340 66.03% 20.05% Economic Planning County Public 25,333,400 - 25,333,400 23,933,364 - 23,933,364 13,136,557 - 13,136,557 54.89% -5.53% Service Board Administration 122,954,300 - 122,954,300 139,354,880 - 139,354,880 123,263,549 - 123,263,549 88.45% 13.34% and Public Service County Assembly 455,000,000 135,000,000 590,000,000 424,413,000 25,000,000 449,413,000 393,141,115 6,891,617 400,032,732 89.01% -23.83% SUB-TOTALS 965,083,300 398,769,540 1,363,852,840 1,194,209,796 193,554,635 1,387,764,431 882,947,907 145,719,175 1,028,667,082 74.12% 1.75% Energy and ICT 23,759,380 86,000,000 109,759,380 35,299,095 5,200,796 40,499,891 28,688,038 3,200,796 31,888,834 78.74% -63.10% SUB-TOTALS 23,759,380 86,000,000 109,759,380 35,299,095 5,200,796 40,499,891 28,688,038 3,200,796 31,888,834 78.74% -63.10% Roads, Transport 103,423,400 300,605,000 404,028,400 198,508,372 496,605,000 695,113,372 143,411,292 389,618,584 533,029,876 76.68% 72.05% and Infrastructure SUB-TOTALS 103,423,400 300,605,000 404,028,400 198,508,372 496,605,000 695,113,372 143,411,292 389,618,584 533,029,876 76.68% 72.05% Medical Services 1,536,348,700 100,947,828 1,637,296,528 1,609,467,187 199,129,538 1,808,596,725 1,367,945,750 106,654,568 1,474,600,318 81.53% 10.46% Public Health and 306,410,400 153,297,872 459,708,272 263,128,355 153,297,872 416,426,227 237,318,423 - 237,318,423 56.99% -9.42% Sanitation SUB-TOTALS 1,842,759,100 254,245,700 2,097,004,800 1,872,595,542 352,427,410 2,225,022,952 1,605,264,173 106,654,568 1,711,918,741 76.94% 6.10% Youth, Sports, 45,826,800 25,200,000 71,026,800 62,701,828 16,200,000 78,901,828 27,811,612 12,623,709 40,435,321 51.25% 11.09% Culture and Tourism Education and 203,146,500 45,110,900 248,257,400 197,496,362 53,069,585 250,565,947 145,442,779 46,688,507 192,131,286 76.68% 0.93% Vocation Training SUB-TOTALS 248,973,300 70,310,900 319,284,200 260,198,190 69,269,585 329,467,775 173,254,391 59,312,216 232,566,607 70.59% 3.19% Trade, Industry 107,611,500 - 107,611,500 96,471,630 - 96,471,630 82,567,128 - 82,567,128 85.59% -10.35% and Cooperatives SUB-TOTALS 107,611,500 - 107,611,500 96,471,630 - 96,471,630 82,567,128 - 82,567,128 85.59% -10.35% Agriculture 126,142,340 464,179,260 590,321,600 123,011,122 384,723,733 507,734,855 99,518,401 283,501,991 383,020,392 75.44% -13.99% Livestock and 86,442,994 30,000,000 116,442,994 79,292,532 34,373,829 113,666,361 61,441,215 10,339,009 71,780,224 63.15% -2.38% Fisheries Lands, Physical 81,246,700 110,000,000 191,246,700 84,066,166 277,799,204 361,865,370 64,939,816 126,124,955 191,064,771 52.80% 89.21% Planning and Urban SUB-TOTALS 293,832,034 604,179,260 898,011,294 286,369,820 696,896,766 983,266,586 225,899,432 419,965,955 645,865,387 65.69% 9.49% Environment and 18,439,600 5,000,000 23,439,600 3,206,408 3,206,408 - - - 0.00% -86.32% Natural Resources Water Services 51,199,750 100,000,000 151,199,750 40,247,656 110,200,000 150,447,656 29,106,779 13,059,380 42,166,159 28.03% -0.50% and Irrigation SUB-TOTALS 69,639,350 105,000,000 174,639,350 43,454,064 110,200,000 153,654,064 29,106,779 13,059,380 42,166,159 27.44% -12.02% GRAND TOTAL 3,655,081,364 1,819,110,400 5,474,191,764 3,987,106,509 1,924,154,192 5,911,260,701 3,171,139,140 1,137,530,674 4,308,669,814 72.89% 7.98% 2.3.5 Implications for the FY 2021/2022 performance During the year under review, several CARA revenues including Equitable Share of National revenue, DANIDA, KCSAP, KUSP (UDG) and ASDSP were not released in full. This in turn affected implementation of the budget hampering service delivery. The performance in the FY 2021/2022 affected the financial objectives set out in the County Fiscal Strategy Paper 2021 in the following ways: (i) In the FY 2021/22, there were severe cash flow challenges due to delayed release of CARA revenue with funds disbursement from Equitable Share of Revenue due in June amounting to Ksh. 337.1 million not disbursed by National Treasury. The revenue deficit on Own Sources of Revenue amounting to Ksh. 110.6 million which affected service delivery and delayed payment for goods and services rendered to the County by our suppliers. (ii) Out of the total County Revenues Equitable share constituted 81.85 percent, balances carried forward 7.3 percent, conditional grants 5.8 percent and CORe 5.05 percent. That the CORe base decreased slightly from KES 254 million realized in FY 2020/21 to KES 239 million realized in FY 2021/22 representing about 5 percent of the total county revenues. This can be partly attributed to the fact that it was an electioneering period. The government will seek to improve revenue collection in the FY 2023/24. This will be done by strengthening the revenue administration in a bid to expand the tax base and improve compliance. (iii)That absorption rates by most County departments were above 70 percent and the overall actual expenditure level reaching 77% of the target. This was still hampered with the delay of release in funds and the requirement to cover pending bill costs. The failure to achieve full funds absorption can be attributed to revenue deficit and unrealized loans and grants. The government will put in place appropriate measures to improve absorption of resources from development partners. (iv) That the expenditure on personnel emoluments consumed 46.25 percent way above the 35 percent of all revenues to the County Government as required by PFM regulations 2015, which continues to exert pressure on County Resources. The expenditure on use of goods comprised 13.47 percent of the total budget while other development consumed 20.86 percent. Given the above deviations, the revision of revenues and expenditure ceilings for FY 2022/23 and the medium term will be based on the revised macroeconomic assumptions and be affirmed in the County Fiscal Strategy Paper 2023. The County Government will try to implement the fiscal responsibility principles stipulated in Section 107 of the PFM Act 2012 but will make appropriate modification to the financial objectives to be contained in the CFSP 2023 to reflect the changed circumstances. SECTION III: RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK County Government of Tharaka Nithi continues to ensure commitment to prosperity through the implementation of programmes that are geared towards uplifting the living standards of its citizens. We are committed to the “leaving no one behind” development approach as captured in the objectives of our development framework. The administration has strived to ensure that it consistently maintains a satisfactory development budget threshold recommended by the PFM Act, 2012 to support direct growth across all the sectors. This strategy has been effective in initiating sustainable social economic programs. Tharaka Nithi county has supported the efforts of the national government by continuous improvement of transport infrastructure that connect major towns and incentivized new development to be built along these roads. Although the County Government has a key target on access roads, feeder roads and opening of new rural in-roads it is important to note that the big picture is to have universal development which is inclusive and non-discriminative. This robust countywide strategy includes improvement of elements such as social amenities and accessibility to public places across sub-counties, towns and wards for purposes of ensuring benefits are shared and that urban sprawl is controlled where towns are growing at an impressive rate. 3.1 Recent Economic Developments 3.1.1 World economic outlook A tentative recovery in 2021 has been followed by increasingly gloomy developments in 2022 as risks began to materialize. Global output contracted in the second quarter of this year, owing to downturns in China and Russia, while US consumer spending undershot expectations. Several shocks have hit a world economy already weakened by the pandemic: higher-than- expected inflation worldwide especially in the United States and major European economies triggering tighter financial conditions; a worse-than-anticipated slowdown in China, reflecting COVID- 19 outbreaks and lockdowns; and further negative spillovers from the war in Ukraine. The war in Ukraine has triggered a costly humanitarian crisis that demands a peaceful resolution. At the same time, economic damage from the conflict will contribute to a significant slowdown in global growth in 2022 in addition to inflation. Fuel and food prices have increased rapidly, hitting vulnerable populations in low-income countries hardest. Global growth is projected to slow from an estimated 6.1 percent in 2021 to 3.6 percent in 2022 and 2023. This is 0.8 and 0.2 percentage points lower for 2022 and 2023 than projected in January. Beyond 2023, global growth is forecast to decline to about 3.3 percent over the medium term. War- induced commodity price increases and broadening price pressures have led to 2022 inflation projections of 5.7 percent in advanced economies and 8.7 percent in emerging market and developing economies,1.8 and 2.8 percentage points higher than projected last January. Multilateral efforts to respond to the humanitarian crisis, prevent further economic fragmentation, maintain global liquidity, manage debt distress, tackle climate change, and end the pandemic are essential. Global growth is expected to moderate from 5.9 in 2021 to 4.4 percent in 2022, half a percentage point lower for 2022 than in the October World Economic Outlook (WEO), largely reflecting forecast markdowns in the two largest economies. A revised assumption removing the Build Back Better fiscal policy package from the baseline, earlier withdrawal of monetary accommodation, and continued supply shortages produced a downward 1.2 percentage-points revision for the United States. In China, pandemic-induced disruptions related to the zero- tolerance COVID-19 policy and protracted financial stress among property developers have induced a 0.8 percentage-point downgrade. Global growth is expected to slow to 3.8 percent in 2023 Economic growth in Sub-Saharan Africa (SSA) is estimated at 4 percent in 2021, up from a contraction in economic activity of 2 percent in 2020. However, growth in the region is expected to decelerate in 2022 amid a global environment with multiple (and new) shocks, high volatility, and uncertainty. The economy is set to expand by 3.6 percent in 2022, down from 4 percent in 2021, as it struggles to pick up momentum amid a slowdown in global economic activity, continued supply constraints, high inflation, and rising financial risks due to high and increasingly vulnerable debt levels. Although the direct trade and financial linkages with Russia and Ukraine are small, the war will likely impact Sub-Saharan African economies through higher commodity prices, higher food, fuel and headline inflation, tightening of global financial conditions, and reduced foreign financing flows into the region. The growth effects in the region are expected to be marginal however, the largest impact is on the increasing likelihood of civil strife as a result of food- and energy-fueled inflation amid an environment of heightened political instability. 3.2 Overview of Recent Economic Developments From 2015 to 2019, Kenya’s economy achieved broad-based growth averaging 4.7% per year, significantly reducing poverty (which fell to an estimated 34.4% at the $1.9/day line in 2019). In 2020, the COVID-19 shock hit the economy hard, particularly disrupting international trade and transport, tourism, and urban services activity. Kenya managed to contain the health and economic impacts of multiple Coronavirus (COVID-19) waves in 2021, helped by targeted containment measures and progress on vaccination, but later faced a potentially large economic shock from the war in Ukraine. Kenya’s real gross domestic product (GDP) is projected to grow by 5.5 per cent in 2022 and 5.2 per cent on average in 2023–24. The poverty rate has resumed its trend decline after rising earlier in the pandemic. Although Kenya’s economic performance remained strong in the early months of 2022, external challenges have mounted. The economy is vulnerable to the global price impacts of the Russian invasion of Ukraine, particularly through net fuel, fertilizer, wheat and other food imports. The impact of the war in Ukraine is weighing on the global economic recovery from the COVID-19 pandemic. Kenya’s public debt is expected to fall to 64.9% of GDP in the 2023/24 (July-June) fiscal year from 67.5% in 2022/23, helped by continued economic growth and lower borrowing costs resulting from an increase in concessional financing. Domestically, a key risk to the outlook is a further worsening of the current drought, which is having a devastating effect on food security and livelihoods in affected parts of the country and is necessitating increased social spending on food assistance. However, the economy is expected to continue to recover and gradually return to growth of above 5 percent. The near- term economic outlook for Kenya, as elsewhere, remains unusually uncertain and contingent on the course of the pandemic. With regards to interest and exchange rates, the Kenyan economy continues to register macroeconomic stability with low and stable interest rates and competitive exchange rates to support exports. The year-on-year inflation rate increased to 6.5 percent in April 2022 from 5.8 percent in April 2021 mainly due to higher food and fuel prices. The central bank rate has remained at 7.0 percent since April 2020. Lending to the private sector has remained strong with the credit expanding by 9.1 percent in the 12 months to Feb 2022 from 9.6 percent in Feb 2021. All economic sectors registered positive credit growth rates reflecting improved demand as economic activities picked up. Growth of credit is expected to remain resilient. Year-on-year overall inflation rate has remained low, steady and within the policy target range of 5+/-2.5 percent since end 2017. Due increase in food prices, inflation rate increased to 6.45 percent in October 2021 from 4.84 percent in October 2020 driven. However, the rate remained within the target range for the given period. Note that, a rising inflation rate in a county with a large consumer base will have a more marked impact on our county revenue projections through the negative impact of inflation on aggregate demand. The governments prudent policies and targeted stimulus interventions have helped the country during the health crisis and will continue to anchor a strong and stable growth. The Government is currently focusing on the implementation of the Economic Recovery Strategy (ERS) that aims at restoring the economy to a strong growth path, creating jobs and economic opportunities across all regions of the country with a view to tackling social and income inequalities. It is expected that the successful implementation of the Economic Recovery Strategy will promote inclusive growth and transform the lives of Kenyans. As a county, we are focusing on the six main thematic areas that drive our socioeconomic well-being, which includes Agriculture, Health, Road Infrastructure, Urban Development, Trade and Education. This will see an increase in our county’s economic growth. 3.3 Progress Report on Budget Implementation At the time of preparing this CBROP, the transition to the new government was underway. In line with Regulation 56 of the Public Finance Management Regulation, 2015, the County Treasury may be required to revise the budget due to new policies or reorganization of government that may occur. In the event of such reorganization, the County Treasury will give guidance to County entities on the necessary changes which will be required in both the FY2022/23 Budget and preparation of the FY 2023/24 and Medium-Term Budget. The County Government will focus on budget implementation based on the fiscal responsibility principles outlined in the PFM Act, 2012, Section 107(2). Fewer network downturns are expected, with the near-complete implementation of IFMIS and e-procurement, which have significantly improved utilization of funds in the county. Increased utilization of more functions will also improve budgetary processes which promote smoother process workflows and system acceptance. The county total revenue increased from KES 4.4 billion in FY 2020/21 to KES 4.7 billion in FY 2021/22, indicating a 5.7 percent increase. This upward trend in total revenue is partly attributed to the increase in equitable share from KES 3587 million in FY 2020/21 to KES 3877 in FY 2021/22 and balances carried forward from KES 91 million to KES345 million. On the other hand, local revenue and loans and conditional grants recorded a decrease in the actual realized amounts over the past year. 3.4 County Economic Outlook and Policies Between FY 2017/18 and FY 2021/22, the administration focused on upgrading overall county infrastructure development and establishing systems. Today, more people enjoy improved access to commerce and government services. However, the county acknowledges that economic potential is not a fixed endowment. There is need to refine and harness improved approaches that ensure strategic investments are made to help residents realize economic empowerment. The dynamic approaches to find economically viable responses to this challenge have led to prioritization of six thematic areas that are anticipated to redirect the county economic agenda from leaning into infrastructural development to holistic service delivery: agriculture, health, road infrastructure, urban development, trade and education will be the key drivers of socioeconomic well-being in the county. The agriculture sector remains the county’s prime driver of economic growth, with a majority of households relying on the sale of produce for sustenance. Addressing the challenges linked to the sector requires value addition, promotion of subsidies for farm inputs, increased mechanization, contract farming and linking farmers to organized groups that improve bargain power. Specifically, promoting programs that support these and more interventions will improve the utilization of financial resources to improve market linkages and assure minimum returns for overall county growth is a major priority for the county government. In the future, programmes will prioritize training to ensure that modern approaches to marketing are encouraged for enhanced production. Adding value to livestock will unlock the potential of the sector and link the physical infrastructure established will also foster adoption of lucrative practices that will prevent income loss on produce that fails to reach trading centers. Basic service provision of water and irrigation play a crucial role in ensuring the county realizes food security and is an important driver of development in the county. Partnerships with the national government will be fostered in the current term to secure financing for the establishment of water reservoirs and smallholder irrigation projects in marginalized areas. Further, capitalizing on the establishment of more household connections is expected to improve provision of clean water in the long term. The county government will continue identifying investments to ensure that the county’s capacity improves in the next five years will be done through implementation of improved management and conservation through these county funded projects. The health sector has been at the core of the infrastructure development agenda between FY 2017/18 and FY 2021/22. Focusing on the sector contributed to improved response to the COVID-19 pandemic and other emerging crises that directly impacted national and county growth. Going forward, operationalization of more facilities that boost accessibility and upgrading health centers and dispensaries through laboratory services provision will be promoted to enhance the experiences of patients. Additionally, the county government will support policies and programmes that promote community health units, community outreach programs, equipment distribution and improving primary health care services in facilities such as Chuka Level IV hospital, Marimanti Hospital, Magutuni Hospital, and Mpukoni Health Center. Ensuring that a conducive atmosphere for trade requires that more entrepreneurs and businesses benefit from the structures developed during the first term. It also requires that county government balance revenue collection and promotion of entrepreneurship. One approach to facilitating this is establishment of Special Economic Zones that promote enterprise development and innovation, which will support local business owners. Specifically, the county government will focus on programmes that promote business optimization for small and medium scale businesses by settling more traders in more modern markets, stalls, artisan garages and encouraging a 24-hour economy for these businesses to further increase the volume of trade. The county government will illuminate discussions on the facilitative infrastructure and further develop more volume seal roads and maintain and open up more roads at ward level. In the past, these initiatives were linked to better communication and transport networks that improved overall living standards. Going forward, programmes that promote job creation for the youth and facilitate trade and investment will be supported. Socioeconomic growth will be promoted in programmes that are designed to make towns and trading centers vibrant and accessible for all residents. The county government intends to spur marketing efforts in order to realize better domestic trade and investment indicators in the county and encourage click and mortar approaches for young entrepreneurs seeking to participate in ecommerce through ICT development. Programmes will promote digitization of operations and the use of the toll-free platforms to facilitate delivery of vital information on government services to every part of the county. Education, youth, social services, culture and tourism all have the ability to address the impasse between socioeconomic development and politics. Improved support for the county’s unemployed youth through training and provision of basic education for children is a key priority for the county government, which will resume rehabilitation of training centers, classrooms and provision of learning materials for all. Going forward, policy development will focus on the establishment of a funding platform to support enterprise improvement, support of needy students and talent development. The county government will also remain committed to supporting enterprising mothers to engage in economic activities through supporting expansion of the ongoing crèche programme. While a clear order cannot be easily determined in the journey to meet the needs of the county in an efficient, unanimously accepted and compatible manner, the county government has advocated for fair policies that prioritize key initiatives that can further transform the lives of residents. These include completion of stalled and ongoing projects, increasing local revenue collection and special focus on the socioeconomic development of the county. Between FY 2022/23 and FY 2026/27, ensuring that gains can be realized by all will be done through strategically organized programmes aligned with those at national government level. This will ensure improved compliance and adherence to progressive policies anticipated to be in place during this period. 3.5 Medium Term Fiscal Framework The 2022 County Budget Review and Outlook Paper (CBROP) has been prepared while still anticipating for the economic recovery in the short and medium-term. Economic growth has been revised to relatively slower rates in much of especially the Advanced Economies, Emerging Markets and Developing Economies. This has been attributed due to the ongoing battle against the (COVID-19) variants such as Omicron and Delta, coupled with the Russia- Ukraine tension which has had and will continue to have a ripple effect on the rest of the world. Global baseline forecast for growth in 2022 was initially projected at 6.1 percent this has been revised downwards to 3.6 percent to reflect uncertainties and gloomy outlook that is emerging in most countries. The pace is projected by the International Monitory Fund’s (IMF) World Economic Outlook (WEO) April 2022 edition. Over the medium term, the IMF forecasts that this should moderate to an average of 3.3 per cent. The economic growth in Sub-Sahara Africa region is projected to slow from 4.2 percent in 2021 to 3.7 percent in 2022. Table 10: International GDP Growth Estimates and Forecasts (Year-On-Year Percentage Change Source: International Monetary Fund, World Economic Outlook (WEO), April 2022 On the domestic scene, Kenya’s economy demonstrated remarkable resilience to the COVID- 19 shock in 2020 and a staged strong recovery in 2021. Following the easing of COVID-19 restrictions, reopening of the economy as well as targeted stimulus interventions by the government, the economy registered strong recovery of 9.9 percent in the third quarter of 2021. Overall, the economy is estimated to have expanded by 7.6 percent in 2021, a much stronger level from the contraction of 0.3 percent in 2020. In 2022, the economy is projected to stabilize at 6.0 percent. The outlook in 2022 will be reinforced by the prevailing stable macroeconomic environment by ensuring inflation remains within the government target range while interest rates remain stable to support growth in private sector credit. The fiscal performance in the FY 2021/2022 was satisfactory, revenues recorded positive growth rates reflecting improvement in business environment, impact of reversal of some tax relief measures effected in January 2021, tax policy measures and enhanced revenue administration by the Kenya Revenue Authority. Revenues are expected to improve in the rest of the fiscal year following the reopening of the economy and the increased demand for imports as well as improved domestic sales. Overall expenditures were within Programme target underpinned by good revenue performance and adequate liquidity in the government securities market. However, ministerial expenditure targets were not fully met partly due to low absorption of foreign financed projects and lower than projected disbursement to Counties. Table 11: Fiscal Framework (KShs million) Source of Data: National Treasury The County Government has the fiscal policy of maintaining a zero-fiscal balance. In this regard, FY 2021/22 posted a performance without budget deficit and in compliance with recommendation from the National Treasury for counties to ensure that total planned expenditures equal total expected revenues. The county government will focus more on expenditure prioritization; implement cost-cutting measures and ensure implementation of Post Covid-19 Economic Recovery Strategy. The huge wage-bill the county incurs leaves little allocation towards county endeavors thus curtailing achievement of key targets. Through this paper, policy suggestions that can be implemented in the short to medium term, in order to tame the rising wage-bill include; review of recruitment practices, freeze on employment on need basis, and streamlining payroll and control systems (cleaning of payroll) in the county. 3.6 Risks to the Outlook Although the Tharaka Nithi County economy has exhibited a resilient growth trend, it is still vulnerable to shocks emanating from macro environment affecting the larger national economy. The continued interventions in the economy by the Central Bank and National Treasury through modified macroeconomic policies, austerity expenditure measures, revamped revenue raising strategies and investment in mega infrastructure projects will have significant effect on the performance of county’s key sectors. The following key risk factors had an impact on the performance of the county economy; a) Domestic Front: re-emergence of COVID-19 variants and possible adverse weather conditions could reverse the projected economic recovery. b) External Front: Country Risk: Tharaka Nithi County was affected by the combined risks associated with investing in Kenya: Political risk: The ongoing conflict in Eastern Europe has created uncertainties that will affect the global economic outlook through disruption of supply chains, rising global oil prices and increased inflationary pressures. Sovereign and Exchange rate risk: Fluctuation of Kenyan Shilling against the dollar negatively affected dollar denominated imports and dollar-based loans. The costs of farm inputs and machinery generally imported were higher than current market rate, however, Tharaka Nithi County buffered this by providing subsidized inputs to farmers. The adjustment of base lending rates for inter-bank lending by Central Bank has resulted in rising interest rates thus high cost of doing business. However, the interventions by the Central Bank and National Treasury targeting both monetary and fiscal policies will guarantee stable business environment characterized with stable inflation rate, exchange rate and moderate interest rates. Trading blocs Risk: Regional trade between Kenya and its border countries has been considered as one of the major drivers towards economic growth. Policies to promote trade such as reduction of taxes and custom duties were adopted but still the Kenyan economy experiences low economic growth, this raises the question, to what factors should be put in place to encourage more growth. Regional trade between member countries such as East African Community (EAC) and Common Market for East and Central Africa (COMESA) are guided by common trade laws whereby the member countries are exempted from tax, however, the same goods are expensive in our country as compared to other member countries, hence, discouraging local production. Kenya stands to gain from trading within the region if the appropriate policy measures included in the vision 2030 blueprint which seeks to address issues like infrastructure development, promote security, enhanced food security, public private partnership among others are fully implemented. Environmental risks: The country has so far experienced below normal rainfall in last year. The weather forecast points the possibility of experiencing the same weather conditions pattern in the coming short rains in most parts of the country later in the year. Output of the agriculture sector, which is largely rain fed, is therefore likely to be lower than the 2021 level Fiscal Risks Economic risk: on average, inflation is expected to average 7.7% in 2022. For 2023 inflation is expected to average 7.1% Current debts: Public debt stock is expected to hit 8.6 trillion at the close of June 2022 before rising further to 9.5 trillion next June. By June 2026, the public debt stock is expected to hit 11.6 trillion. The government will have to impose high taxes on its citizens so as to be able to pay the national debt. This will also lead to delay in disbursement of equitable share to the counties, hence delaying development. SECTION IV: RESOURCE ALLOCATION FRAMEWORK This section sets out how the County Government intends to spend within its budget. It establishes the total revenues it expects to raise during the period under review, and then allocates these across the County Government departments by setting expenditure ceilings for each government department. has the following sub-sections as discussed below: a) Adjustment to the proposed (2022-2023) budget; b) The medium-term expenditure framework for 2023/24– 2025/26 FYs; c) Proposed (2023-24) budget framework; and d) Projected fiscal balance and likely financing. 4.2.5 Recurrent vs Development Budget Expenditure The FY 2023/24 budget targets a recurrent expenditure of KES 3,764.1 million including KES 495 million allocated to the County Assembly against KES 3,672 million estimated in FY 2022/23 and KES 3,529 million spent in FY 2021/22. This recurrent expenditure represents 67.0% of the total County expenditure. Table 12 Recurrent and Development Expenditure 2023/24-2025/26 Expenditure Actual Approved Projected Projected Projected classification Expenditure budget estimates estimates estimates 2021/22 estimates (MTEF) 2023/24 (MTEF) 2024/25 (MTEF) 2025/26 2022/23 Recurrent 3,529,051,532 3,672,581,364 3,764,087,330 3,952,291,697 4,149,906,281 Development 1,023,906,323 1,817,401,959 1,850,820,983 1,943,362,032 2,040,530,134 Total 4,552,957,855 5,489,983,323 5,614,908,313 5,895,653,729 6,190,436,415 The development expenditure targeted for FY 2023/24 is estimated at KES. 1,850.8 million which represents 33 percent of total expenditure. This figure is expected to increase marginally in FY 2024/25 at KES 1,943.4 million but projected to increase to KES 2,040.5 million in FY 2025/26 projections. These proportions of recurrent and development expenditures indicate that the County Government is compliant with PFM Act, 2012 requirement that the development expenditure shall not be lower than 30 percent in the medium term. 4.1 Adjustment to the Proposed 2022/23 Budget Implementation of the FY 2022/23 Budget has begun slowly due to the post-election transition challenges. This performance coupled with a weak outcome in revenue collection in the FY 2021/22 indicate that the projections for the FY 2022/23 are optimistic and offers a moderate base for supporting the expenditure estimates in the FY 2023/24 and the Medium-Term Budget. Building from this confidence, the revenue projections and the expenditure estimates for the FY 2022/23 will be adjusted to capture emerging issues. Adjustments to the 2022/23 budget will take into account actual performance of departments so far and absorption capacity in the previous financial year 2021/22 and the need to finance completion of key projects. It will also consider priority supporting the projects aimed at achieving the leaving no one agenda and supporting economic recovery. In addition, the review will also address the new government structure after the unveiling of a new County Executive, pending accounts payables for goods and services rendered and brought forward from previous years. The total revenues for the FY 2022/23 are projected at KES 5,489.98 million. The recurrent expenditures are projected at Ksh 3,642,58 million (66 percent of total revenue) and development expenditures are projected at Ksh 1,847.40 million (34 percent of total revenue). Additionally, the CG will strive to ensure that it maximizes on all its revenue sources to achieve the set CORe target of KES 350 million in FY 2022/23. Among the measures, the CG will be strengthening and entrenching revenue automated system and further reforms in revenue administration. 4.2 Medium Term Expenditure Framework The county government, over the medium term, will allocate adequate resources to the County’s priority sectors to enhance their contribution to the county economy and its economic growth is noteworthy. Efficiency is a key aspect when it comes to the maximum use of the available resources. To pursue efficiency; the county government will monitor, evaluate and oversee allocation, re-allocation and management of the public finances. The following table summarizes specific activities that require significant increments in allocations: Sector Interventions Health 1. Pharmaceuticals and non-pharmaceuticals supplies 2. Huma resource costs 3. Provision of specialized services 4. New equipment & increased operations costs 5. Completion of health facilities 6. Emergency services 7. Automate services in more health facilities 8. Community health care services Agriculture 1. Climate change mitigation 2. Post-harvest management 3. Extension services and Training of framers 4. Offering high quality farm inputs 5. Constructing, improving and modernizing markets and urban centres 6. Promotion of Irrigated agriculture 7. Pasture development and bulking 8. Breeding 9. Disease control and surveillance 10. Value chain development 11. Marketing and value addition Infrastructure 1. Tarmacking more roads 2. Opening up, expansion and improvement of County feeder roads 3. Construction of more bridges and culverts 4. Purchase, Repair and maintenance of heavy machines 5. Urban development Education 1. Construction of ECDE Classes 2. Promotion of sporting activities 3. Gender and youth Empowerment programmes 4. Improvement of youth polytechnics 5. Tourism promotion and marketing Public 1. Policy formulation and implementation administration 2. Governance reforms 3. Resource mobilization and revenue administration 4. Project planning and management 5. Human resource management and training 6. legislation and oversight 7. coordination and management of county affairs Water and 1. Domestic water provision environment 2. Irrigation agriculture 3. Dam construction 4. climate change mitigation 5. Environmental conservation and management 6. Rainwater harvesting 7. Ground water harvesting 8. Waste management 9. Policy development and implementation Lands and 1. Land management physical 2. Survey and mapping planning 3. Physical planning services 4.2.1 Proposed 2023/24 Budget Framework In a “Rolling “medium budget plan, the first year forms the starting point for the next financial years. The preparation of the FY 2023/24 and the medium-term budget plan will focus on targeted interventions of economic recovery, programs that aim to reposition the economy on an inclusive and sustainable growth path. This will be realized through the implementation of the priorities that safeguards livelihoods, create jobs, and achieve faster recovery. In addition, provision of core services, ensuring equity and minimizing costs by eliminating duplication and inefficiencies will be given priority. Furthermore, the government will continue on the path of fiscal consolidation with a focus on enhanced revenue mobilization from all sources. Cost effective budgeting and limitation on new projects will be the other key strategy. Additionally, maintain a zero fiscal deficit will continue to be the primary target in the budget framework. 4.2.2 Revenue Projections During the financial year 2023/24, total revenues are expected to be KES 5,614.9 million comprising of an equitable share of KES 4,424.9 million, county own revenue (CORe) of KES 300.0 million and grants of KES 890. Million. This is in comparison to the KES 4214.78 million, KES 350.0 million, and KES 925.8 million projected in FY 2022/23 for Equitable share, local revenue and grants respectively. The county own source revenue is expected to maintain a gradual growth trend relatively given the stable economic environment after the elections and the post COVID Crisis. The aim is to mobilize more revenue from those categories that have not been fully exploited including land rates, plot rents, liquor licensing and building approval. Table 13: MTEF Revenue projections by source 2023/24-2025/26 Description Actual Actual Printed 2023/24 FY Projection Projection 2020/21 FY 2021/22 FY Estimate projected 2024/25 FY 2025/26 FY 2022/23 FY Equitable Share 4,262,200,932 3,877,062,704 4,214,198,393 4,424,908,313 4,646,153,729 4,878,461,415 Allocation Local Revenue 254,745,602 239,381,562 350,000,000 300,000,000 315,000,000 330,750,000 Grant income 785,034,194 274,855,098 925,784,930 890,000,000 934,500,000 981,225,000 Grand Total 5,301,980,728 4,391,299,364 5,489,983,323 5,614,908,313 5,895,653,729 6,190,436,415 Figure 4 shows the revenue performance and the projections over the medium term. MTEF REVENUE PROJECTSIONS 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Actual Actual Printed 2023/24 FY Projection Projection 2020/21 FY 2021/22 FY Estimate projected 2024/25 FY 2025/26 FY 2022/23 FY Equitable Share Allocation Grant income Local Revenue Figure 3: Revenue Projections FY 2022/23-2025/26 Figure 3 shows that there is slight decrease in local (own source) revenue collection from KES 255 million realized in FY 2020/21 to KES 239 million collected in FY 2021/22. The decline is attributed to effects of the electioneering period with reduced economic activities and high default rates in revenue payments. The revenue and expenditure projections in the medium term are as shown in the Table 13. MILLIONS 4,262 785 255 3,877 275 239 4,214 926 350 4,425 890 300 4,646 935 315 4,878 981 331 Table 14 : Revenue and Expenditure Projections 2021/22-2025/26 Description 2020/21 FY 2021/22 FY 2021/22 FY 2022/23 FY 2022/23 FY 2023/24 FY 2023/24 FY 2024/25 FY 2024/25 FY 2025/26 FY Actual Budget Actual Budget (CBROP 2021) (CFSP 2022) (CBROP (CFSP 2022) (CBROP (CBROP 2022) 2022) 2022) TOTAL REVENUE 5,554,534,906 5,911,260,701 4,736,939,549 5,489,983,323 5,722,403,729 5,682,408,313 5,614,908,313 5,958,028,728 5,895,653,729 6,190,436,415 & GRANTS Unspent Bal b/f 252,554,178 373,811,941 345,640,185 0 0 0 0 0 0 0 \Previous FY Revenue (Total) 5,301,980,728 5,537,448,760 4,391,299,364 5,489,983,323 5,722,403,729 5,682,408,313 5,614,908,313 5,958,028,728 5,895,653,729 6,190,436,415 Equitable Share 4,262,200,932 4,214,198,393 3,877,062,704 4,214,198,393 4,646,153,729 4,424,908,313 4,424,908,313 4,646,153,728 4,646,153,729 4,878,461,415 Allocation Local Revenue 254,745,602 350,000,000 239,381,562 350,000,000 367,500,000 367,500,000 300,000,000 385,875,000 315,000,000 330,750,000 Grant income 785,034,194 973,250,367 274,855,098 925,784,930 708,750,000 890,000,000 890,000,000 926,000,000 934,500,000 981,225,000 Grand (Total) 5,554,534,906 5,911,260,701 4,736,939,549 5,489,983,323 5,722,403,729 5,682,408,313 5,614,908,313 5,958,028,728 5,895,653,729 6,190,436,415 Total Expenditure 5,554,534,906 5,911,260,701 4,736,939,549 5,489,983,323 5,722,403,729 5,682,408,313 5,614,908,313 5,958,028,728 5,895,653,729 6,190,436,415 Recurrent 3,687,336,554 3,987,106,509 3,529,051,532 3,672,581,364 3,874,591,697 3,822,266,713 3,764,087,330 4,066,599,098 3,952,291,697 4,149,906,281 Recurrent as % of 66% 67% 75% 67% 68% 67% 67% 68% 67% 67% CG Total Revenue Personnel 2,044,509,882 2,235,622,424 2,105,920,482 2,210,371,633 2,578,741,151 2,379,562,899 2,305,943,953 2,427,885,800 2,421,241,151 2,542,303,208 Emolument Operations & 1,642,826,672 1,751,484,085 1,423,131,050 1,462,209,731 1,295,850,546 1,442,703,814 1,458,143,377 1,638,713,298 1,531,050,546 1,607,603,073 Maintenance Personnel 37% 38% 44% 40% 45% 42% 41% 41% 41% 41% Emoluments as % of CG Revenue Development 1,352,325,204 1,924,154,192 1,023,906,323 1,817,401,959 1,847,812,032 1,860,141,600 1,850,820,983 1,891,429,630 1,943,362,032 2,040,530,134 Development as % 24% 33% 22% 33% 32% 33% 33% 32% 33% 33% of CG Total Revenue Unspent Bal 514,873,148 0 183,981,694 0 0 0 0 0 0 0 Current FY 4.2.4 Expenditure Forecasts The total expenditure in the 2023/24 FY is projected to amount to KES 5,614.9 million which is projected to increase to KES 5,895.9 million and KES 6,190 million in FY 2024/25 and FY 2025/26 respectively. The recurrent expenditure is estimated at KES 3,764.1 million compared to 3,672.5 million planned in FY 2022/23 and the actual expenditure of KES 3,687 million incurred in FY 2021/22. The projected Recurrent expenditure FY 2023/24 represents 67 percent of total expenditure being comprising personal emoluments of KES 2,306 million and KES 1,458 million for operations costs. The Development expenditure for FY 2023/24 is projected to be KES 1,850.8 million compared to KES 1,817.4 million planned during FY 2022/23 and KES 1,352.3 million incurred in FY 2021/22. Table 14 indicates the projections of expenditure in the medium-term period. Table 15: Summary of Actual and Projects Expenditure MTEF Expenditure Actual Approved Projected Projected Projected Classification Expenditure Budget Estimates Estimates Estimates 2021/22 Estimates (MTEF) (MTEF) (MTEF) 2022/23 2023/24 2024/25 2025/26 Recurrent 3,687,251,222 3,672,581,364 3,764,087,330 3,952,291,697 4,149,906,281 Personnel 2,105,920,482 2,210,371,633 2,305,943,953 2,421,241,151 2,542,303,208 Emoluments Operations & 1,642,741,340 1,462,209,731 1,458,143,377 1,531,050,546 1,607,603,073 Maintenance Development 1,352,325,204 1,817,401,959 1,850,820,983 1,943,362,032 2,040,530,134 County Assembly 400,032,732 449,413,000 475,000,000 490,000,000 520,000,000 Un spent Bal 514,873,148 - - - - current FY Total 5,554,449,574 5,489,983,323 5,614,908,313 5,895,653,729 6,190,436,415 Table 15 illustrates the proposed budget ceilings for the MTEF period. These allocations therefore represent the preliminary and projected baseline ceilings in each sector for the proposed budget year’s MTEF. Table 16:Summary of Indicative departmental Ceilings for the MTEF Period 2023/24- 2025/26 MINISTERIAL DEPARTMENTS TOTAL EXPENDITURE KSHS % SHARE OF TOTAL EXPENDITURE 2021/22 Actual 2022/23 2023/24 2024/25 2025/26 2021/22 2022/23 2023/24 2024/25 2025/26 Expenditure Estimates Ceilings Projections Projections Actual Estimates Ceilings Projections Projections Expenditure Governor's Office 109,121,904 142,275,700 155,249,500 163,011,975 171,162,574 2.53% 2.59% 2.76% 2.76% 2.76% Finance and Economic Planning 383,112,340 555,789,440 520,364,500 546,382,725 573,701,861 8.89% 10.12% 9.27% 9.27% 9.27% County Public Service Board 13,136,557 25,333,400 28,200,400 29,610,420 31,090,941 0.30% 0.46% 0.50% 0.50% 0.50% Administration and Public Service 123,263,549 122,844,890 135,000,000 141,750,000 148,837,500 2.86% 2.24% 2.40% 2.40% 2.40% County Assembly 400,032,732 485,000,000 495,000,000 519,750,000 545,737,500 9.28% 8.83% 8.82% 8.82% 8.82% Sub Total 1,028,667,082 1,331,243,430 1,333,814,400 1,400,505,120 1,470,530,376 23.87% 24.25% 23.75% 23.75% 23.75% Energy, Housing and ICT 31,888,834 119,759,380 53,940,705 56,637,740 59,469,627 0.74% 2.18% 0.96% 0.96% 0.96% Roads, Transport, and Infrastructure 533,029,876 616,147,810 580,400,500 609,420,525 639,891,551 12.37% 11.22% 10.34% 10.34% 10.34% Sub Total 564,918,710 735,907,190 634,341,205 666,058,265 699,361,179 13.11% 13.40% 11.30% 11.30% 11.30% Medical Services 1,474,600,318 1,551,727,187 1,650,113,800 1,732,619,490 1,819,250,465 34.22% 28.26% 29.39% 29.39% 29.39% Public Health and Sanitation 237,318,423 459,708,272 450,500,400 473,025,420 496,676,691 5.51% 8.37% 8.02% 8.02% 8.02% Sub Total 1,711,918,741 2,011,435,459 2,100,614,200 2,205,644,910 2,315,927,156 39.73% 36.64% 37.41% 37.41% 37.41% Youth, Sports, Culture and Tourism 40,435,321 71,757,600 80,816,860 84,857,703 89,100,588 0.94% 1.31% 1.44% 1.44% 1.44% Education and Vocation Training 192,131,286 248,257,400 260,763,408 273,801,578 287,491,657 4.46% 4.52% 4.64% 4.64% 4.64% Sub Total 232,566,607 320,015,000 341,580,268 358,659,281 376,592,245 5.40% 5.83% 6.08% 6.08% 6.08% Trade, Industry and Cooperatives 82,567,128 107,611,500 115,700,400 121,485,420 127,559,691 1.92% 1.96% 2.06% 2.06% 2.06% Sub Total 82,567,128 107,611,500 115,700,400 121,485,420 127,559,691 1.92% 1.96% 2.06% 2.06% 2.06% Agriculture 383,020,392 595,821,600 620,012,000 651,012,600 683,563,230 8.89% 10.85% 11.04% 11.04% 11.04% Livestock and Fisheries Development 71,780,224 132,073,094 148,600,700 156,030,735 163,832,272 1.67% 2.41% 2.65% 2.65% 2.65% Lands, Physical Planning and Urban Development 191,064,771 86,646,700 94,400,320 99,120,336 104,076,353 4.43% 1.58% 1.68% 1.68% 1.68% Sub Total 645,865,387 814,541,394 863,013,020 906,163,671 951,471,855 14.99% 14.84% 15.37% 15.37% 15.37% Environment and Natural Resources 0 18,029,600 30,544,580 32,071,809 33,675,399 0.00% 0.33% 0.54% 0.54% 0.54% Water Services and Irrigation 42,166,159 151,199,750 195,300,240 205,065,252 215,318,515 0.98% 2.75% 3.48% 3.48% 3.48% Sub Total 42,166,159 169,229,350 225,844,820 237,137,061 248,993,914 0.98% 3.08% 4.02% 4.02% 4.02% Grand Total 4,308,669,814 5,489,983,323 5,614,908,313 5,895,653,729 6,190,436,415 100.00% 100.00% 100.00% 100.00% 100.00% Table 17: Summary of Indicative Sector Ceilings SECTOR TOTAL EXPENDITURE KSHS % SHARE OF TOTAL EXPENDITURE 2021/22 Actual 2022/23 2023/24 Ceilings 2024/25 2025/26 2021/22 2022/23 2023/24 2024/25 2025/26 Expenditure Estimates Projections Projections Actual Estimates Ceilings Projections Projections Expenditure Public Admiration 1,028,667,082 1,331,243,430 1,333,814,400 1,400,505,120 1,470,530,376 23.87% 24.25% 23.75% 23.75% 23.75% Infrastructure, Energy, ICT and Housing 564,918,710 735,907,190 634,341,205 666,058,265 699,361,179 13.11% 13.40% 11.30% 11.30% 11.30% Health 1,711,918,741 2,011,435,459 2,100,614,200 2,205,644,910 2,315,927,156 39.73% 36.64% 37.41% 37.41% 37.41% Education, Youth and Sports 232,566,607 320,015,000 341,580,268 358,659,281 376,592,245 5.40% 5.83% 6.08% 6.08% 6.08% General Economic and Commercial Affairs 82,567,128 107,611,500 115,700,400 121,485,420 127,559,691 1.92% 1.96% 2.06% 2.06% 2.06% Agriculture 645,865,387 814,541,394 863,013,020 906,163,671 951,471,855 14.99% 14.84% 15.37% 15.37% 15.37% Environment, Water and Natural Resources 42,166,159 169,229,350 225,844,820 237,137,061 248,993,914 0.98% 3.08% 4.02% 4.02% 4.02% Grand Total 4,308,669,814 5,489,983,323 5,614,908,313 5,895,653,729 6,190,436,415 100.00% 100.00% 100.00% 100.00% 100.00% % SHARE OF TOTAL EXPENDITURE 2023/24 CEILINGS Environment, Water And Natural Resources, 4.02% Public Admiration , Agriculture, 15.37% 23.75% General Economic And Commercial EdAufcfaatiirosn, 2, .Y0o6u%th And Sports, 6.08% Infrastructure , Energy , ICT And Housing, 11.30% Health, 37.41% Figure 4: Pie chart sector ceilings 4.2.6 Wage bill The County Government anticipates to spend a total of KES 2,305.9 million in FY2023/24 towards employee compensation and KES 1,458 million on operations. This is slightly above the recommended limit as per the fiscal responsibility principles as stated in PFM Act, 2012 Section 107(2) (c) which indicates that the expenditure on wages and benefits for County Government shall not exceed a percentage of the total revenue as prescribed in the regulations. In the proposed MTEF budget for FY 2023/24, this percent is expected to remain at 38% in line with the CG focus on stabilizing the wage bill. 4.2.7 Expenditure Ceilings The final expenditure ceilings for the county departments shall be outlined in the County Fiscal Strategy Paper 2023 which will then guide the final budget submissions. However, the departments are advised to consider baseline ceilings provided in this CBROP as the basis of prioritizing programs. 4.2.8 Projected fiscal Balance (deficit) and likely financing The proposed 2023/24 county budget framework is balanced, with projected revenues equaling projected expenditures. The county governments are required to maintain a balanced budget in the medium term. Therefore, the County Government has complied with this advisory by the National Treasury and has maintained a planned expenditure equal to the planned total revenue. However, technical deficits arise especially where there is under collection of own revenue, delay by the national government to release all monies allocated to the county governments before 30th June and donor funds not received before the end of a financial year. SECTION V: CONCLUSION The review of implementation of FY 2021/22 budget shows that the fiscal framework and the updated macroeconomic forecast demands for the need for caution and review of the financial objectives for FY 2022/23. This is basically as a result of the uncertainty in the expected revenue both for the equitable share and own revenue source. Therefore, the reviewed expenditures reflect the real circumstances that surrounded the implementation of FY 2021/22 budget and are broadly within the fiscal responsibility principles outlined in the PFM Act, 2012, Section 107(2) except for the wage bill which has gone beyond the 35% as recommended by the regulations. The fiscal outcomes are also consistent with the national financial objectives as outlined in relevant policy documents and various legislations including the Constitution of Kenya, County Government Act, 2010, and PFM Regulations 2015. The County through its long-term development objectives is devoted to ensuring services delivered are aligned to specific needs of our communities as contained in the CIDP 2018- 2022. In doing so, the CG will endeavor to mobilize more resources through innovative and enhanced revenue collection mechanisms, embracing private-public partnership and creation of a conducive environment for business to thrive. This will be achieved through equity and fairness in distribution of resources and prioritization of development based on thematic approach for a particular financial year. ANNEXURES Annex I: Budget Calendar for the FY 2022/23 ACTIVITY RESPONSIB DEADLINE ILITY 1. Prepare and issue budget circular with guidelines CEC Member August 30th 2022 1.1 One day sensitization workshop for accounting officers for Finance September 2022 2. Sector Woking Groups and CBEF County 2.1.1 1st CBEF Meeting – Review of FY 2021/2022 and Treasury 28th September 2022 Consideration of ADP FY 2023/24 2.1.2 Launch and first meeting for SWGs and sensitization October 2022 on SDGs 2.2 Second meeting for SWGs Submission of projects and programmes to be implemented for 9th December 2022 FY 2023/24 2.3 Third meeting for SWGs March 2023 3. County Annual Progress Report County 3.1 Draft CAPR Treasury 16th September 2022 3.2 Validation of the CAPR (Economic 19th – 23rd Sept 2022 3.3 Submission to CEC for Approval Planning 30th September 2022 3.4 Submission to CA for Approval Department) 21st October 2022 4. Monitoring and Evaluation County Treasury 4.1 M&E field work September 2022 and (Economic January 2023 Planning 4.2 Annual M&E week 2nd week November Department) 2022 5. Statistical abstract 2020 County 5.1 Draft Treasury October 2022 5.2 Launch (Economic December 2022 Planning Department 6. Development of ADPs for FY 2023/24 and 2022/23 County 6.1. Draft ADP FY 2023-2024 Treasury August 2022 6.2 Submission of ADP FY 2023-2024 to CEC (Economic 31st August 2022 6.3. Submission of ADP FY 2023-2024 to County Planning 1st September 2022 Assembly Department) 6.4. Report of ADP from County Assembly 6.5. Consolidation of CA recommendations to Final ADP 6.6. Approval of ADP by County Assembly (Within 21 days upon submission) 6.7. Meeting with TWGs for ADP FY 2024/25 26th May 2023 6.8. First draft ADP FY 2024/25 18th August 2023 6.9. Validation ADP FY 2024/25 14th – 22nd August 2023 6.10. CEC Approval ADP FY 2024/25 25th August 2023 6.11. Submission ADP FY 2024/25 to County Assembly 31st August 2023 7. Development of county Integrated Development Plan County (CIDP) 2023-2027 Treasury 7.1 Public participation (Economic September 2022 7.2 Drafting process Planning October 2022 7.3 Validation Department) November 2022 7.4 Approval, dissemination and implementation November 2022 9. Development of County Budget Review and Outlook County Paper (CBROP) 2022 Treasury 8.1. Estimation of Resource Envelope (Budget Unit) 15th Sep 2022 8.2. Determination of policy priorities “ 8.3. Preliminary resource allocation to Sectors “ 8.4. Draft County Budget Review and Outlook Paper 23rd Sep 2022 8.5. Validation 26th -30th September 2022 8.6. Submission and approval of CBROP by CEC 30th September 2022 8.7. Submission of approved CBROP to County Assembly 14th October 2022 9. Preparation of Budget proposals for the MTEF Departments 9.1. First retreat to draft Sector Reports (Programmes and SWGs 24th October 2022 projects submitted) 9.2. Public Sector Hearings County August 2022 and Treasury February 2023 9.3. Review and Incorporation of stakeholder inputs in SWGs 30th December 2022 Sector proposals 9.4 Submission of Sector Reports to Treasury Sector 10th March 2023 Chairpersons 9.5. Consultative meeting with CECs/COs on budget County 18th April 2023 proposals Treasury 9.6 3rd CBEF Meeting: Consideration of Budget Estimates County 24th April 2023 Treasury 10. Draft County Fiscal Strategy Paper (CFSP) 2020 10.1. Draft CFSP County 30th Jan 2023 Treasury 10.2. Draft Debt Management Strategy (DMS) Budget Unit “ 10.3.1 Validation Workshop Budget Unit 13th – 17th February 2023 10.3.2 2nd CBEF Meeting: Consideration of CFSP and County 20th February 2023 DMS (Strategic Planning) Treasury 10.4. Submission of CFSP and DMS to CEC for approval County 22nd February 2023 Treasury 10.5. Submission of CFSP & DMS to County Assembly County 28th February 2023 for approval Assembly 10. Preparation and approval of Final Departmental Budgets 11.1. Develop and issue final guidelines on preparation of County January, 2023 2023-2024 MTEF Budget Treasury 11.2. Submission of Draft Revenue Raising Measures Line 30th March, 2023 (Finance Bill) to County Treasury departments 11.3. Submission of Budget proposals to County Treasury Revenue 30th March, 2023 (First draft) Department 11.4. Consolidation of the Draft Budget Estimates (final County 14th April, 2023 draft) Treasury 11.5. Submission of Draft Budget Estimates to CEC County 25th April, 2023 Treasury 11.6. Submission of Draft Budget Estimates to County County 30th April, 2023 Assembly Treasury 11.7. Submission of Final Revenue Raising Measures Revenue 30th April, 2023 (Finance Bill) to County Treasury Department 11.8. Review of Draft Budget Estimates by County County 16th June, 2023 Assembly Assembly 11.9. Report on Draft Budget Estimates from County County 16th June, 2023 Assembly Assembly 11.10. Consolidation of the Final Budget Estimates County 16th June, 2023 Treasury 11.11. Approval of Appropriation Bill by County County 30th June, 2023 Assembly Assembly 11.12. Approval of Vote on Account by County County 30th June, 2023 Assembly Assembly 11.13 Budget Statement CEC Finance 15th June, 2021 11.14 Appropriation Bill passed County 30th June, 2021 Assembly 11. Public participation County August 2022 - Treasury February 2023 Annex II: Revenue Performance per Stream and location Sub-County Igaamb Tharaka Tharaka Chogori Chuka Marima Mwim Mutham Chuka Public Veterina Weigh Chuka Magutu Marima Kibung County Total a South North a Urban Urban nti bi Sub bi Sub Sub Health ry t And Hospital ni nti a Head Ngo’m Urban County County County Services Measu Hospita Hospital Hospit Quarte be re l al rs Land & Rate - - - - - - - - - - - Plot-Rent - 176,332 303,352 145,643 663,784 337,279 388,115 215,740 324,185 535,365 3,089,795 S.B. P 2,579,7 1,245,60 1,613,93 5,236,04 19,434,7 2,587,11 2,315,0 4,601,56 4,311,3 43,925,14 74 0 2 8 40 8 44 1 25 2 Cess Fee 2,292,1 9,538,86 11,308,8 69,460 - 3,664,40 469,490 743,400 2,170,9 30,257,63 40 0 90 0 90 0 Market & 1,854,3 774,340 1,203,39 549,170 1,995,64 461,440 372,615 118,520 215,680 7,545,149 Slaughter 50 0 4 Vehicle 540,610 20,000 1,143,55 5,726,16 5,200 900 377,850 495,000 8,309,270 Parking - 0 0 House & 1,486,11 1,788,21 3,274,326 Stalls 6 0 Hire Of Hall - - &Lorry- Plan 17,250 10,000 113,000 271,600 1,812,80 124,000 25,800 193,700 104,700 2,067,7 4,740,567 Approval & 7 10 Physical Planning Fees- Weights & - - Measures- Penalties 5,000 3,000 88,050 280,338 1,000 14,500 1,000 241,500 634,388 Agriculture 79,030 78,230 249,540 - 106,720 5,600 519,120 Services Mt. Kenya - 276,200 276,200 Lodge/Touri sm- Trns, Appl, 3,000 300,900 102,000 9,000 190,300 32,000 88,000 227,000 952,200 & Adj. Cooperatives - - Search, Min, 3,000 99,500 21,000 93,000 51,000 28,000 75,000 10,000 380,500 Ext Advertiseme 172,000 7,500 3,787,00 2,500 7,500 22,500 3,999,000 n t 0 Motor/C - - Miscellaneou 3,200 5,406,3 5,409,502 s 02 Administrati 392,010 2,600 4,540 31,580 173,861 18,530 11,975 635,096 ve Fees and General Charges Plan App. - - Fees, Health Sch.Insp - - Food - - Premises Liquor 1,283,5 297,500 558,700 2,011,70 3,622,60 453,000 1,633,5 1,782,00 1,732,0 13,374,51 Inspection 0 0 0 0 10 0 0 1 1 Hospital Fees - 79,116,2 4,134,97 18,452,4 1,022,8 102,726,5 4 7 9 4 5 75 46 Private - - Schools R024 Fire Fighting 12,800 12,800 services Public 1,691,2 1,691,200 Health 0 0 Veterinary 7,628,62 7,628,620 0 Physical - Planning R026 Enforcement - Total 9,218,6 12,447,3 15,559,8 11,070,4 39,581,2 7,811,18 5,553,3 8,232,77 9,609,4 1,691,2 7,628,62 - 79,116,2 4,134,97 18,452,4 1,022,8 5,406,3 239,381,5 64 62 44 17 44 7 74 1 56 00 0 47 9 45 75 02 62