Intergovernmental fiscal relations in Kenya: A Case study of Nairobi City Council

Abstract

The alm of this study is to identify the maJor responsibilities of local authorities in Kenya, and compare these expenditure responsibilities to sources of revenue. An attempt has been made to analyse the determinants of the observed weak financial position of local authorities in Kenya, particularly of the Nairobi City Council. It has been found that the relatively high personal income level of Nairobi residents does not prevent severe ~financial hardship for the Nairobi City Council. The gap between resources and expenditure requirements, is, in the case of Nairobi City Council, deepened as a result of various Central Government decisions: the abolition of the Graduated Personal Tax and consequent loss of revenue; the abolition of primary school fees; the introduction of some free medical services; and the subsequent expanded expenditure on education and health for which the Central Government has not made adequate grants to the NCC. The position was compounded by several centrally determined salary rate increases for teachers and other Nairobi City Council employees. Various policy suggestions are made as to ways of meeting the growing budget and service level deficits while rationing the local government financing system.