The PFM Reform Strategy 2018-2023 is anchored in the Medium-Term Plan 2018-2022 (MTP), now in its third iteration (MTP III) which in turn is guided by Vision 2030. The MTP III is anchored on three pillars, Economic, Social and Political, with Enablers providing the underpinning foundation for delivery against each of the pillars. Public finance reforms are identified as one of the keys enabling components of the MTP. In this context, the Strategy underpins the policy for delivery of macroeconomic stability and public services in the MTP III.
The reforms implemented under the preceding Strategy 2013-2018 were designed around functional themes based on the budget cycle. The reforms were successful in establishing a solid foundation for PFM; all major PFM legislation for national and county governments were enacted; the Integrated Financial Management Information System (IFMIS) was rolled out to all Ministries, Departments and Agencies (MDAs) and Counties; accounting standards were established; financial reporting improved with timely and consolidated financial statements prepared; revenue mobilisation improved at national level and some counties, and the Public Private Partnership (PPP) policy implemented. Fiscal devolution was achieved through the establishment of revenue sharing arrangements and a system of fiscal transfers and of inter-governmental institutions for facilitating the process put in place. The progress provided a strong framework for PFM implementation across the government.
Notwithstanding the fact that a fundamental framework for PFM has been put in place, there remains significant challenges. Recent studies and analytical work have revealed a number of these challenges thus providing rich evidence to inform the development of this Strategy. For example, in terms of macro-economic management, the increase in the cost of domestic debt service and the debt-to-GDP ratio has grown and fiscal space for delivering MTP priorities is limited. In terms of the delivery of services and public investments, the prioritisation of projects and ensuring reliability of funding for service delivery remain a challenge.
The Public Financial Management Reforms (PFMR) Strategy aims to build on the success of PFM reforms to date and unblock these challenges with a vision for “A public finance management system that is efficient, effective and equitable for transparency, accountability and improved service delivery”.
The overall objective of the Strategy is “A public finance management system that promotes transparency, accountability, equity, fiscal discipline and efficiency in the management and use of public resources for improved service delivery and economic development”.
To achieve this objective, the development of the Strategy involved convening stakeholders at the national and county level. The stakeholders first identified the central challenges in PFM which impact macro-economic management and service delivery. The challenges were drawn from the findings and lessons from the PFM Strategy 2013-2018 Mid-Term Review and other analytical work. The stakeholders worked together with results teams to identify the changes required to address these challenges and agreed on clear results and actions to achieve the results. The engagement therefore focused on results which addresses agreed challenges, and not functional themes, with MDAs participating in multiple results teams where they have a role. The process led to the identification of a set of actions and results in the following eight (8) distinct Results Areas;
- Sustainable and predictable fiscal space to deliver government programs
- Strategic and transparent spending on public investment and service delivery in line with National and County Policy Commitments
- Reliable cash for service delivery and public investment
- Value for money in procurement and contract management
- Value for money, performance & accountability in staffing for service delivery
- Education institutions, health and other service facilities effectively manage public resources
- Disciplined financial management and accurate reporting, and
- Accountability delivered through audit, oversight and follow up