2005年-世界发展银行全球_Kenya___Public_Expenditure_Review_2004_Report_on_the_Structure_and_Management_of_Public_Spending_190页_12mb

Public Expenditure Review 2004: Summary

Core Content

The Public Expenditure Review (PER) 2004 report, prepared by the World Bank in collaboration with the Government of Kenya, evaluates the structure and management of public spending from 2002/03 to 2003/04. It also outlines recommendations for improving fiscal policy and public expenditure management (PEM) in the context of Kenya’s Economic Recovery Strategy for Wealth, Employment and Creation (ERS).

Main Objectives and Recommendations

• Objectives: To assess the performance of public spending, analyze fiscal trends, and recommend reforms to enhance public expenditure management.
• Key Recommendations:
  • Develop and implement a credible medium-term fiscal strategy.
  • Prioritize expenditure to achieve ERS objectives.
  • Strengthen PEM through better budget planning, execution, and monitoring.
  • Make hard budget choices to cut unproductive expenditure and focus on ERS priorities.

Fiscal Performance (2002/03–2003/04)

• Aggregate Fiscal Policy: The government aims to reduce the budget deficit, maintain the revenue-to-GDP ratio above 21%, and use external concessional financing to fund deficits and reduce domestic debt.
• Fiscal Deficit: In 2002/03, the fiscal deficit after grants was 4.0% of GDP. For 2003/04, the deficit is expected to be 2.5% of GDP, against a target of 3.3%, due to improved revenue collection, higher grants, and reduced planned expenditure.
• Revenue Trends: Revenue collections in 2003/04 are projected to be lower than the target of 22.2% of GDP, continuing a downward trend. This is attributed to reduced import duty collections, likely to fall further with the implementation of the Common External Tariff (CET).
• Expenditure Trends: Public expenditure has been on an upward trajectory, rising from 23.5% of GDP in 1999/2000 to 26.1% in 2002/03. In 2003/04, the wage bill reached 8.6% of GDP, driven by salary increases for teachers, police, and university staff.
• Debt Management: The government aims to reduce the debt-to-GDP ratio by 2-3% annually, but this may not be achievable with current projections. External concessional assistance will likely remain the main source for capital expenditure.

Challenges and Risks

• External Aid Variability: External aid is highly unpredictable, especially in program mode, which may lead to budget instability. Coordination between the government and aid providers is needed to streamline aid practices.
• Parastatal Liabilities: Off-budget liabilities of public enterprises and local authorities may suddenly come on-budget without adequate planning, affecting fiscal stability.
• Social Health Insurance: The introduction of national social health insurance lacks clear design and implementation details, with potential high fiscal costs (1.5-2.0% of GDP).
• Wage Bill Containment: Future increases in teachers’ salaries will make it difficult to contain the wage bill.
• Customs Revenue Impact: Implementation of CET is expected to reduce customs revenue by more than 1% of GDP.
• Expenditure Arrears: A large stock of expenditure arrears and stalled projects will require significant resources when resolved.

Composition of Government Expenditure

• Recurrent Expenditure: Averages around 18% of total expenditure, up from 15% in the late 1990s. Still insufficient for maintaining public assets and service delivery.
• Development Expenditure: Share of total expenditure declined until 2001/02 but rose to over 16% in 2002/03. Most of this increase was financed by foreign assistance and arrears. GoK-financed development expenditure remains around 5% of total.
• Wage Bill: Constitutes about one-third of total expenditure, with consolidated fund services (interest and pensions) accounting for one-sixth.
• Transfers to Parastatals: Accounted for about 12% of total expenditure in 2003/04, mainly due to transfers to for-profit public enterprises. These transfers represent a significant opportunity cost due to forgone returns on government equity.

Public Expenditure Management (PEM)

• Recent Developments: The PER process involved 27 MPERs, extending from eight ministries in the previous year. It focused on assessing budget performance against ERS priorities and evaluating the effectiveness of budgetary institutions.
• Performance Indicators:
  • Deviations between actual and printed budgets.
  • Stock of pending bills.
  • Compliance with expenditure allocations.
  • Effectiveness of spending.
• PEM Reforms: The report recommends strengthening PEM through better budget planning, improved execution, and enhanced monitoring. It also suggests the need for a more realistic fiscal strategy and a focus on ERS priorities.

Sector-Specific Analysis

• Ministry of Education, Science and Technology (MOEST):
  • Expenditure has been increasing, with a focus on primary education and teacher training.
  • The wage bill has been a major component, with salary increases affecting budget sustainability.
• Ministry of Health:
  • Public health spending has been on an upward trend.
  • There are concerns about the effectiveness of spending and the need for improved service delivery.
• Ministries of Agriculture, Livestock and Fisheries Development, and Cooperative Development and Marketing:
  • Transfers to parastatals have increased, but the government is under pressure to restructure these entities.
  • The ERS emphasizes increased investment in infrastructure, health, and less developed regions.
• Ministry of Roads, Public Works and Housing:
  • Expenditure trends show a focus on infrastructure development.
  • There are concerns about the effectiveness of spending and the need for better planning and monitoring.

Looking Forward

• Medium-Term Expenditure Framework (MTEF):
  • The MTEF is used to guide budget planning and allocate resources to ERS priorities.
  • The current framework is not credible due to reliance on optimistic revenue and aid projections.
  • A more conservative approach is needed, with a consideration of alternative scenarios, including reduced spending.
• ERS Priorities:
  • The ERS calls for increased investment in infrastructure, health, and targeted poverty programs.
  • There is a need for hard budget choices to reallocate resources effectively.

Key Takeaways

• Public expenditure in Kenya has been increasing, driven by wage bill growth and transfers to parastatals.
• Fiscal performance in 2003/04 was better than expected, but future challenges remain.
• The current fiscal strategy is not robust, and a more realistic approach is needed.
• PEM reforms are essential to align with ERS objectives and improve the efficiency and effectiveness of public spending.