The economy exhibited signs of recovery from the effects of COVID in 2021 with real GDP growth rates of 0.7% between January and March and 10.1% in the final quarter of 2020/21, this was mainly supported by improved performance in education, ICT, transport and storage, health, financial and insurance and manufacturing sectors. The period also exhibited stability in the prices of basic commodities, in September, 2021, the increase in the general price level was 6.9% from 4.2% in a similar period in 2020, a phenomenon that was mainly driven by higher fuel and food prices. However, greater performance would have been achieved had the government responded to the pandemic more effectively. The improved economic performance correspondingly resulted in enhanced performance in revenue. Total Revenue and External Grants collected in quarter one of 2021/22 amounted to Ksh 513 Bn, representing a growth by 34.07% compared to a similar period in 2020/21 and at least 4.36% of the target revenue amount. The improvement could partly be explained by the mitigative measures that were taken by government in 2020 against the ensuing shocks experienced by the economy through the Economic Stimulus Programme (ESP). Delay in the disbursement of exchequers is particularly observed in early quarters which has affected the implementation of planned programmes by MDAs and subsequently timely delivery of services. This could be due to failure to consider the seasonality in the revenue collections in designing annual workplans and cash flow projections that are key in improving the timing of the releases of funds. Notably, effective budget execution has been hampered by high debt servicing charges which currently is more than a third of the recurrent expenditure. Key factor driving high debt servicing charges is partly due to increase in non-concessional borrowing and has contributed to rising debt vulnerabilities. To this end, the IEA proposes the need for the government to set realistic revenue targets to inform budgeting process in order to improve predictability of public funds, need to develop a contingency for the restructuring of state-owned enterprises and a call for enhanced public accountability and reduction on the wastage.
