Title: Kenya to Adopt Zero-Based Budgeting: Treasury CS Reveals Bold New Approach for FY 2025/26
In a significant shift towards optimizing government spending, Treasury Cabinet Secretary (CS) announced that the Kenyan government will fully embrace Zero-Based Budgeting (ZBB) starting with the FY 2025/26 budget. This marks a departure from the traditional incremental budgeting approach and is poised to revolutionize how public funds are allocated in the country.
Speaking during a recent press release, the CS reiterated that ZBB will require Ministries, Departments, and Agencies (MDAs) to start their budgeting process from zero. Each financial year, MDAs will have to justify every expenditure request without relying on historical trends or previous allocations. This fresh approach is expected to bring discipline to government spending, curbing unnecessary costs, and ensuring that every shilling is spent efficiently.
What is Zero-Based Budgeting?
Zero-Based Budgeting (ZBB) is a method where all expenses must be justified for each new period, starting from a “zero base.” In contrast to traditional incremental budgeting, which uses historical data as the basis for new budget decisions, ZBB evaluates all expenditures and allocates funds only where they are genuinely needed. In this system, every budget request competes on an equal footing, allowing for more rigorous scrutiny and alignment with government priorities.
Justifying Every Shilling Spent
According to the CS, the main goal of adopting ZBB is to ensure that every item in the budget is justified and approved based on its necessity and alignment with Kenya’s economic and development objectives. “The MDA’s entire budget needs to be justified and approved, rather than just being based on historical trends, which is generally incremental in nature,” he emphasized.
The incremental budgeting approach, traditionally used in Kenya, often results in unnecessary expenditure and inefficiencies. It automatically allocates funds to the same sectors or projects year after year, even when they no longer require the same level of funding. This has led to resource misallocation, duplication, and bloated government spending in the past.
With ZBB, the government aims to eliminate these inefficiencies by ensuring that only the most essential programs and projects receive funding. By encouraging MDAs to evaluate their needs afresh, the approach is also expected to help the government allocate its limited resources more effectively, especially as it seeks to address the pressing needs of the population.
The Role of the Budget Costing Tool
To facilitate the implementation of ZBB, the National Treasury has introduced a Budget Costing Tool integrated into the IFMIS Budget Module for the National Government. This tool is designed to provide standardized costing methodologies, which will streamline the calculation of budget baselines. With this system in place, the government hopes to achieve greater accuracy and credibility when preparing its budget estimates.
This tool will not only help MDAs prioritize their expenditure based on real-time needs but will also ensure that budgeting is more transparent and accountable. As each department has to justify their budget proposals from scratch, the tool will be instrumental in streamlining the process and ensuring all proposals align with Kenya’s strategic development goals.
Stronger Oversight through Sector Working Groups (SWGs)
The CS also emphasized the role of Sector Working Groups (SWGs) in ensuring the successful implementation of ZBB. These groups will play a critical role in assessing and justifying the expenditures for FY 2025/26 and beyond. Their primary responsibility will be to ensure that every budget request is supported by a clear rationale, ensuring that only the most important programs receive the funding they require.
The focus will be on allocating limited resources to enhance program efficiency and address priority areas rather than maintaining the status quo. With this increased oversight, it is expected that wastage in public spending will be minimized, and public sector productivity will be maximized.
Moving Towards Sustainable and Transparent Budgeting
Kenya’s adoption of ZBB is a step in the right direction for improving the country’s fiscal responsibility. As the government seeks to address the economic challenges exacerbated by global inflation, climate change impacts, and a growing public debt, the need for better resource management is more crucial than ever.
ZBB provides an opportunity for Kenya to build a sustainable budget framework where government expenditures are closely aligned with the country’s long-term development goals. By breaking away from traditional, incremental budget practices, ZBB has the potential to streamline government operations, eliminate redundancies, and foster a more transparent and accountable budgeting process.
Potential Challenges Ahead
Despite the promising benefits of ZBB, the transition is expected to face certain challenges. Implementing such a rigorous budgeting system requires significant capacity building across government agencies. Many MDAs may not have experience with ZBB, and it will take time for them to fully adapt to this new way of budgeting.
Additionally, the process of justifying every budget item can be time-consuming, and there are concerns about whether the government has enough resources to train officials and roll out the ZBB system effectively across all levels.
Nevertheless, with the introduction of the Budget Costing Tool and ongoing government efforts to build institutional capacity, Kenya is well-positioned to tackle these challenges. If implemented successfully, ZBB could fundamentally change how public funds are managed, promoting greater accountability and ensuring that taxpayers’ money is used wisely.
Conclusion
Kenya’s shift to Zero-Based Budgeting for the FY 2025/26 budget is a bold move that has the potential to overhaul government spending and promote fiscal discipline. By requiring MDAs to justify their spending from scratch and focusing on resource efficiency, ZBB is poised to become a powerful tool in enhancing public sector performance and supporting Kenya’s development goals.
With the right systems in place, including the Budget Costing Tool and oversight by Sector Working Groups, this approach could herald a new era of transparent, accountable, and results-driven budgeting in Kenya.
