Why PFM reforms are crucial for the economy

The National Treasury office building.

The National Treasury buildings in Nairobi.

Photo credit: Diana Ngila | Nation Media Group

It is often said that, until the lion learns how to write, every story will glorify the hunter. Let’s tell the story of the history, challenges, opportunities and successes that have been achieved by Public Financial Management reforms.

PFM relates to the way governments manage public resources (both revenue and expenditure) and the immediate and medium-to-long-term impact on the economy.

The PFM reforms secretariat, under the National Treasury, is the agency tasked with coordinating the implementation of PFM reforms in the country. The secretariat is implementing the third PFM reforms strategy covering the period 2018-2023.

The first and second PFM reforms strategy were activity-based. The third strategy, an innovation from the previous strategies, adopted a results-based approach.

The structured PFM reforms journey can be traced back to 2000. The need for a clear roadmap for the future necessitated the development of the Economic Recovery Strategy for Wealth and Employment creation 2003-2007 (ERS), the blueprint that guided the government’s economic policies for 2003-2007.

While implementing the ERS, the government developed the first PFM reforms strategy implemented between 2006 and 2012. One of the biggest pieces of policy document from the strategy was the Kenya Vision 2030 blueprint.

Building on the Vision 2030, the 2010 Constitution was passed and promulgated, introducing fundamental changes in the management of public finance.

It’s equally important to note that, it is during the implementation of the first strategy that the PFM Act 2012 was enacted.

The second PFM reforms strategy was implemented between 2013 and 2018. Much attention was placed on deepening reforms and supporting putting into operation effectively the PFM institutions in line with the new Constitution.

PFM reforms implemented during the second strategy led to the development of the E-Citizen—the gateway to all government services, the first-stop portal for public information and a service, effectively changing the way government delivers services to Kenyans. Under the third strategy, reforms are being undertaken in eight key results areas.

Result area one deals with sustainable and predictable fiscal space to deliver government programmes. Result area two involves strategic and transparent spending on public investment and service delivery in line with national and county policy commitments.

Result area three deals with reliable cash for service delivery and public investment. Result area four deals with value for money in procurement and contract management.

Result area five deals with value for money, performance and accountability in staffing for service delivery, while result area six deals with proper management of public resources in education, health and other service facilities.

In key result area seven, reforms are centred on disciplined financial management. Result area eight deals with accountability delivered through audit oversight. The case for PFM reforms has been made, the results speak for themselves, and it is incumbent upon us to turbo-charge the next phase of reforms.

Kennedy Mwenda, Nairobi

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