Legislative Agenda

Key Provisions(6)

1. 01

   Section 15A — Determination and certification of freed fiscal space

   "Freed fiscal space" means net annual budgetary savings against the pre-reform baseline debt-service and arrears schedule, arising from principal write-downs, interest-rate reductions or maturity reprofiling of external syndicated and bilateral loans; statutory disallowance of unverified or fraudulent pending bills after Auditor-General forensic audit; and compounding domestic interest savings from reduced Treasury bill and bond issuance. The Parliamentary Budget Office and the Controller of Budget jointly certify the shilling quantum not later than 30 days before the Budget Policy Statement under section 25.

2. 02

   Section 15B — Mandatory 50–30–20 statutory allocation formula

   Every shilling of certified freed fiscal space is split: 50% to sovereign debt principal retirement, swept into the Sovereign Debt Redemption Account at the CBK (POCAMLA s.112A) to retire high-cost domestic securities until total public debt falls below 50% of nominal GDP; 30% to high-return national capital infrastructure meeting the s.15C thresholds; and 20% to performance-linked county capital transfers under Article 202(2), over and above the baseline unconditional equitable share. Section 15B(2) bans any allocation, reallocation or viring of 0% of freed fiscal space toward national or county recurrent expenditure — salaries, sitting or travel allowances, hospitality, motor vehicles or administrative overheads — in either the annual Appropriation Act or any Supplementary Appropriation Act.

3. 03

   Section 15C — Gatekeeping for the 30% infrastructure tranche

   No capital funds are released unless the project has completed pre-feasibility, feasibility and independent technical appraisal under the PIM Regulations, 2022 and is logged in PIMIS; demonstrates a verified Economic Internal Rate of Return of at least 12% with a positive Net Present Value certified by the Parliamentary Budget Office; falls within priority productive sectors (bulk water and irrigation, electricity transmission and grid reliability, rural agricultural feeder roads, cold-chain agro-processing, export logistics); and prioritises completion of stalled, physically verified projects at 50%+ completion before any new greenfield start. Every shilling is ring-fenced in a project-specific CBK escrow account, released only against independent quantity-surveying certificates verified by the Office of the Auditor-General.

4. 04

   Section 15D — Performance conditions for the 20% county tranche

   A county draws its share only if the Controller of Budget and the Auditor-General certify that in the preceding year it spent at least 30% of total budget on capital development (s.107(2)(b)); held personnel emoluments at or below 35% of total county revenue (s.107(2)(c)); accumulated zero new unverified pending bills and followed an approved clearance schedule; and achieved own-source revenue growth of at least 5% or met its CRA fiscal-effort target. Withheld allocations are held in escrow for 12 months pending remediation and then revert automatically to the Sovereign Debt Redemption Account — never to county recurrent budgets.

5. 05

   Section 15E — Statutory cap on recurrent expenditure growth

   For the ten-year fiscal consolidation period, total national government non-interest recurrent expenditure (excluding constitutional pensions and primary healthcare/basic education capitation) faces a 0% real growth ceiling. No new state corporation, semi-autonomous agency, taskforce or commission may be created unless funded by abolition and merger of duplicated agencies yielding at least 20% net recurrent saving. Under Article 228(4)–(5), the Controller of Budget shall refuse to authorize any withdrawal breaching ss.15B–15E, and any Accounting Officer submitting such a requisition commits financial misconduct under section 197.

6. 06

   Why these guardrails prevent fiscal slippage

   Neutralising the supplementary-budget escape hatch: s.15B(2) binds both annual and supplementary Appropriation Acts while s.15E(3) empowers the Controller of Budget to block exchequer releases at the payment gate. Stopping white-elephant projects: PIM clearance, the 12% EIRR floor and completion of stalled works before new starts keep the 30% tranche from fragmenting into politically motivated, uncompleted projects. Fixing county indiscipline: the 20% bonus tranche (KSh 37B/year) is strictly conditional on PFM s.107(2) ratios, with forfeited shares redirected automatically into national debt retirement.