Publication: Beyond the Budget Fiscal Policy for Growth and Jobs: A Public Finance Review for Kenya
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2025-06-04
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2025-06-04
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This public finance review (PFR) for Kenya aims both to ensure that every tax shilling benefits the Kenyan taxpayer and to inform the development of a fiscal policy that fosters job creation, poverty reduction, and equity. This PFR explores policy measures that could reduce Kenya’s debt-to- gross domestic product (GDP) ratio by about one-third within 10 years, returning the country to a position closer to its debt level of the 2010s, when the debt buildup began. This scenario takes into consideration increasing economic growth, real wages, and consumption across society. Under this scenario, it is estimated that Kenya’s debt-to-GDP ratio will fall to about 44 percent of GDP by 2035, close to the mid-2010s figure. Real wages and consumption can rise by about 4 percent if all reforms are implemented, and GDP growth and labor productivity by 7.1 and 6.4 percent respectively. The current fiscal situation reflects two underlying constraints. This PFR recommends revenue policies focused on enhancing the efficiency and equity of the tax system while reducing tax exemptions and distortions that further narrow the tax base and repress growth. In certain areas, especially leasehold rents and property taxation, there are clear opportunities to raise additional revenues. While land- and property-based taxes are generally non-distortionary and have the capacity to provide stable, predictable long-term revenues, they are administratively complex and require significant upfront and notable ongoing investments in systems and training. They also rely on a commitment to enforce nonpayment. In addition, the current property tax system in Kenya will benefit from legislative reform, which has a significant lead time and no guarantee of success. Looking beyond the budget, by implementing fiscal, governance, and structural reforms, Kenya can achieve fiscal sustainability while creating jobs and generating services. This PFR provides a range of policy options for the country to achieve these outcomes in the shorter and longer term.
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“World Bank. 2025. Beyond the Budget Fiscal Policy for Growth and Jobs: A Public Finance Review for Kenya. © World Bank Group. http://hdl.handle.net/10986/43291 License: CC BY-NC 3.0 IGO.”
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