This archive report was first published on 15 August 2019.
On August 15, 2019, the World Bank released a report highlighting Kenya's fiscal challenges and recommending key reforms to achieve sustainable debt and drive the Big 4 agenda.
The report emphasizes the need for fiscal consolidation, efficient service delivery, and containment of public debt. However, the country faces significant challenges, including decreased revenue collection, rising cash demands from counties, and the need to fund its development agenda.
These factors threaten to cause macroeconomic instability and fiscal slippages. To address these issues, the World Bank recommends improvements in several fiscal aspects, including changes in government spending, reducing foregone revenue, and improving debt management.
Improving Public Investment Management ¶
One of the key areas of concern is Public Investment Management (PIM). The report reveals that deficiencies in PIM manifest through delays in payments to vendors and contractors, which increases the cost of projects and affects liquidity in the private sector.
Improved PIM will enhance private sector performance, increase private sector-led GDP growth, and drive fiscal sustainability.
Reducing Foregone Revenue ¶
Another area of concern is revenue lost through exemptions. The report states that revenue foregone due to VAT exemptions and zero-rating averages at about 3.5 per cent of GDP. The government should revisit the real costs of exemptions and cut back on generous investment allowances on corporate income tax.
Improving Debt Management ¶
The report also recommends a transparent platform to improve the issuance of government securities. Digital platforms will promote transparency and efficiency, reduce liquidity management challenges, and increase the economy's trust in the government's capacity to repay debt.
