(OFFICE OF THE DEPUTY PRIME MINISTER AND MINISTER FOR FINANCE STATEMENT BY THE DEPUTY PRIME MINISTER AND MINISTER FOR FINANCE ON THE FY 2011/2012 BUDGET 26! June 2011. “There has been much debate over the budget and the budget process and I have deemed it necessary to clarify some of the issues that have been raised surrounding this year’s budget. As I do so, let me reiterate three things. Firstly, ‘Treasury and myself are totally committed to the implementation of the new constitution. Secondly, The Treasury is ‘equally committed to transparency in Public Financial Management, Thirdly, The Treasury, ALSO as the statutory custodian of the macro-economic environment ofthis nation, is duty-bound to exercise utmost care and diligence in the management of our economy. Itis indeed the Treasury's considered view that both the letter and the spirit ofthe ‘new constitution are equally important, Its instructive to note that Chapter 221 of the New Constitution was indeed one of the proposals of the Treasury to the CoE. This was made in the spirit of ensuring that all public and parliamentary participation into the budget making processes would be exhausted before the beginning of the new financial year so as to ensure predictability and efficiency of Government operations from the beginning of the financial year Itis also important that the public understands the process of coming up with the national budget, The folowing are the critical steps in our budget making process i. The first step is the review of strategic plans and ministerial public expenditure; this is done by the ‘ministries between July and August fi, Launch of Sector Working Groups; this is done in the month of September; iii, Finalization of the Budget Outlook paper and issuing of sector ceilings; this is dane in the month of October; jv. Ministerial ceilings; this is done by the respective Sector Working Groups in November and December. The ministry of Finance then consolidates and communicates the respective ceilings to Ministries. vv. Allocation to programs and projects; this is done by the respective ministries immediately after receiving the ministerial ceilings, vic Public Sector Hearings and finalization of sector budget proposals; this is usually done between November ‘and December. The public hearings allow for public participation. Sector budget proposals include feedback from the public ‘vii, Preparation of the itemized budget; ths is done in the month of March, vii, Preparation of the Budget Policy Statement (BPS); this is prepared by Treasury and submitted to Parliament by 218 March ix. Feedback on BPS by Parliament. The debate on the BPS was conclucled on 3° May 2011, The budget making process outlined above usually takes 10 - 11 months. Let us also remember thatthe budget cycle ‘under the old constitution and the promulgation of the new Constitution have met each other halfway. Given the length of time it takes to formulate the budget there probably should have been transitional clauses due tothe fact that the Budget date had been moved Forward by 2 months, As we move towards implementing our new andl desired Constitution we must also take cognizance of our need to transit seamlessly into the new order. In the spirit of the new Constitution, we fast tracked the budget process and recorded the following achievements- ‘+ First, line ministries prepared Budget Proposals based on 10 sectors. These proposals were shared with the public during the Public Sector Hearings, which were held on January 12-14, 2011 at the KIC. Typically ‘under the old budget process, we would have held the Sector Hearings around mid-March. ‘+ Second, we used the Sector Budget Proposals, to prepare the Budget Policy Statement (BPS) in accordance ‘with the requirements ofthe Fiscal Management Act, 2009. The BPS has been discussed with the relevant departmental Committees of Parliament and this gave Parliament an opportunity to contribute towards the Government's Medium Term Policy Priorities, and spending plans. The debate on the BPS was concluded. ‘on 3" May 2011. In the spirit of the new Constitution, we held consultative meetings prior to the submission of the BPS, with the Judiciary and Parliament to agree on their overall funding levels after having taken due regard to the projected resources, 1