Determinants of Fiscal Performance in Kenya

Abstract

The objective of this study was to analyze the determinants of fiscal performance in the Kenya. The study analyzed data for 1963 to 2012 which represented the sample size for the study using Unrestricted Vector Auto regression Analysis. A model on the determinants for fiscal performance in Kenya was also estimated. The research established that real GDP per capita growth rate, the treasury bill rate, the total debt service as a proportion of total exports, inflation rate, tax revenue as a percentage of GDP, broad money to GDP, current account balance and gross government investment are jointly significant determinants of fiscal performance in Kenya. We recommend that the Government should have measures aimed at reducing inflation rates that increases the cost of prices and affects the value of public consumption and subsequently public demand. We also recommend the promotion of local investment by maintaining a stable interest rate leading to increased private investment and increased tax revenues and subsequently improved revenues for the Government .Finally, we recommend re-evaluation of the financial industry or sector by introducing conditions to control lending and consequently utilize available monetary policies to keep money supply in control.