There had been expectations that President William Ruto would appoint the prominent economist and academic Dr David Ndii to a key position in the management of the economy, with pundits predicting a top position at the apex institution of economic policy and financial management – the National Treasury.
The news that Ndii had been appointed chair of the Presidential Council of Economic Advisers confounding mainly because keen observers of the economic policy space were still unable to gauge the clout this new entity is likely to wield in the shaping of policy viz-a-viz the powers of the National Treasury and the Central Bank of Kenya.
Was this going to be the same thing as the National Economic and Social Council (NESC) – a key and influential player in the economic policy making place under former President Mwai Kibaki that authored Vision 2030?
Yet keen observers following the way the making of economic policy is shaping under the new administration must have noticed just how influential Ndii and the team of recently appointed State House-based technocrats have become.
The Weekly Review has learnt that Ndii and his team have been deeply involved in the recent decisions around the financial restructuring of the Kenya Airways.
Last week, the team summoned the management of the company to brief it on the looming strike by pilots and the likely implications of measures that must be implemented under the ongoing IMF programme that include negotiating with international leasing companies to bring down leasing costs, staff rationalisation and the cost of fuel.
It is understood that the presidential council has been influential in the administration’s new plans around issues such as reducing the budget deficit by Sh300 billion, increasing tax collection through the widening of the tax base, and introduction of a savings component in the proposed hustler fund.
At the National Treasury, it is understood that the team has held robust discussions and pushed for change of direction by both the Directorate of Public Private Partnerships and the Debt Management Office.
Ndii is chair of the council, whose members are the prominent investment banker, Mohammed Hassan and Dr Nancy Laibuni of the Kenya Institute for Public Policy Research and Analysis (Kiprra).
Apart from the council, Dr Kamau Thugge, who has served at the National Treasury in the past both as Economic Secretary, and Principal Secretary, occupies the position of Senior Adviser and Head of the Office of Fiscal affairs and Budget policy. Dr Augustine Cheruiyot is the senior adviser and head of economic transformation secretariat.
Last week, came out to clarify the new role of the State House-based and un-vetted technocrats and how their advent is likely to impact on management of the country’s economic affairs. In a tweet, Ndii explained that as opposed to NESC under Kibaki, the council was an executive agency similar to what exists in the United States.
“The Presidential Council of Economic Affairs alongside Office of Fiscal Affairs and Budget are part of the government’s goal to fully operationalise the presidential system,” said Ndii.
Clearly, the idea would appear to have been borrowed from the US which has an Office of Management of Budget at the White House, the National Treasury, and a Congressional Budget Office.
Having adopted a presidential system under the 2010 Constitution, creating an office of management of budget would appear to be a logical consequence.
The rationale is that in presidential systems, the President sits at the apex of economic policy-making, setting goals for standards and performance on budget execution while leaving the National Treasury with the responsibility of implementing the budget and managing the country’s finances.
In the earlier stages of President Kenyatta’s administration, there was muted talk about creation of the Office of Management of Budget at State House.
But the idea was dropped. This is how the country ended up with a presidential system running largely on a public financial management architecture of a parliamentary system of government.
Whether the new bodies created at State House will create jurisdictional disputes and functional overlaps remain to be seen.
But depending on how quickly the State House based entities are able to acquire clout and influence economic management in Kenya is headed towards a system whereby, the President of the country will, for example, be giving the Treasury a budget deficit target while waiting to watch and judge performance against the set standards and targets.
Presidential systems allow the Head of State to be in charge of determining the resource envelop because he is the one who makes election promises and has the mandate of the people.
If the new arrangements take off, the National Treasury will be left with the responsibility of raising taxes, borrowing money and managing the finances.
When Kenya adopted the 2010 constitution, close observers of the economic and financial management scene declared the end of the imperial Treasury.
The evidence and experience, after 10 years of experimenting with a presidential system and devolution is that the emperor remains standing.
The National Treasury allocates budget for itself and other ministries, monitors expenditure against the budgets it has set, conducts internal audits for itself and other ministries, and is the overall parent of the external auditor — the Auditor General.
Thus, there is no independence between those who allocate resources, those who implement projects, and those who oversee.
Yet the creation of these State House-based institution is only the beginning of the transformation in fiscal and management that the country must grow through.
The government still runs a primitive and antiquated cash-based accounting system that does not run on modern accrual-based double entry system.
The government does not keep an asset register, even as it buys more assets. And, while financial reports cover revenues, expenditure and financing, they are mostly on a cash basis.
There is no systematic reporting of expenditure arrears and pending bills are a permanent phenomenon.
And, although the government runs an enterprise resource planning (ERP) system known by the acronym – IFMIS – the system is not a fully-fledged integrated system where databases are linked in a general ledger.
It is the reason regular financial reporting and disclosure remains a big challenge. Managing cash flow has also been a big headache.
