Kenya Public Expenditure Analysis 2019 : Creating Fiscal Space to Deliver the Big Four while Undertaking a Needed Fiscal Consolidation

The Kenyan government remains committed to a planned fiscal consolidation pathway, which should help contain public debt stock at a sustainable level. Nonetheless, there are significant challenges stemming from a slowdown in revenue collection, a growing demand for transfers to county governments, and the need to fund the big four agenda. These issues raise the probability for fiscal slippages, requiring adequate mitigation to safeguard macroeconomic stability. This report provides an overview of the challenges in revenue mobilization, the size and composition of the national government expenditures, and the efficiency of this spending over the last five years. The analysis identifies options for supporting ongoing fiscal consolidation and creating fiscal space for the big four and broad public services delivery. There are three key messages: first, Kenya's tax revenue as a share of gross domestic product (GDP) has decreased and decoupled from the growth in the economy, suggesting some important constraints to enhancing revenue collection. Second, government spending is allocated well (to infrastructure and human capital) but there is scope to improve outcomes from the use of these resources. Third, ensuring efficiency and effectiveness of public spending is critical given tight fiscal space and the expenditure needs under the big four