Independent Budget Analysis: Tools and Techniques

1. Independent Budget Analysis: Tools and Techniques PARLIAMENTARY BUDGET OFFICE KENYA

2. A. BUDGET ANALYSIS • In order to carry out budget analysis there is need to; • Understand the budget proposals and trend in budget allocation over time • The government policies on various sectors. • The target beneficiaries. • The ability to disseminate information to the stakeholders in a user friendly manner.

3. Process of budget analysis • A framework on expenditure analysis is prepared that include; • Overview of the total budget • Summary of total allocation to the spending agency • Key programmes under the agency • Pertinent issues • policy options.

4. B. Appropriation analysis Issues of concern • The adherence to the recommendation of budget and appropriation committee. • Adherence to the constitution and various Acts of parliament concerning budget. • Funding to on-going government activities. • Funding of Government priority projects that may include for example project to enhance food security, create employment.

5. C.COSTING OF BILLS Bill costing is done after bills analysis that includes; • Background information on the bill- what it provides • Summary of the bill- purpose • Determination of whether the bill affects budget or not. • Bill costing is done for those bills that have budget implications. • Analysing information provided, short and long term social economic benefits and whether they outweigh its estimated long-term social economic costs. • Analyse facts provided for non- quantifiable social costs. • Forecast on the social implications of the bills. • Comparable analysis- in line with practice locally, regionally and international practice. • Policy options-

6. D. Models used by PBO • for Projection and Forecasting PBO uses macro models • -Previously PBO used financial programming which is also used by the Ministry of Finance to carry out projections and forecasting. However, there were problems of updating the framework and developing an independent view of the economy. • -The office therefore developed its own macro model

7. Parliamentary Budget Office Model • Model is comprehensive enough to describe the whole economy. • Model is tailored to meet the needs of parliament in playing its budget oversight role. • The model is critical in informing budgetary formulation process e.g. macro projections.

8. PBOM cont’d…. • Provides framework for logical reasoning, analysis of the economy in a consistent and coherent manner. • Tests, compare and quantify various economic theories. • Critical for policy analysis, forecasting and research. • Building scenarios based on different assumptions and unforeseen events such as drought.

9. PBOM Cont’d… • The model also contains a poverty module which is used in combination with PBOM to simulate the effects of macro-economic developments and poverty reduction strategies on the number of poor households. • The poverty module also gives crude estimates of the income tax revenues and can therefore be used to analyze and monitor effects of policies and developments on income tax revenues. • There is also a tax model that is used in tax forecasting.

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