The Effect of National Revenue Allocation on the County Economic Growth in Kenya
Abstract
With the emergence of county governments and their subsequent allocation of money from
the central government, it has become very important to monitor their performance and
especially in terms of their economic wellbeing through GCP. This study sought to establish
the relationship between national government allocations to the counties and county
economic conditions as indicated by their gross county product. The study also recognized
other factors which could have an influence in the relationship and studies them together with
the main predictor variable. The variables were the county government’s economic activities
as indicated by their local revenue generation and the fiscal discipline in the counties as
measured by their amounts of pending bills. The other variable studied was the allocations to
development budgets. The study results indicated that national government allocations had a
positive significant effect on the gross county product. This leads to the recommendation that
more funds should be allocated to the counties as it has proved to contribute to a positive
changes in their GCP. The study also established that net pending bills affected gross county
product positively. This is shows that pending bills are beneficial in uplifting the economic
status of the county governments. This is an indication that spending beyond revenue
availability was in projects and commitments, which were beneficial to the counties. This
however flouts the Zero Based Budgeting expected in the Public Finance Management Act.
To redress the situation and avoid impacting negatively on GCP, while ensuring that county
governments operate within the law, it is a recommendation of this study that more funds be
allocated to the counties from national government to enable them cover the pending bills.
The national government should also develop mechanisms for making counties to realize
their full potential to enable them generate more local revenue. The other variable was the
development budget allocation, which was also found to have a positive impact on GCP
though the effect was insignificant. This indicates that allocating more to the development
expenditure could really uplift the counties economic situation and needed to be emphasized.
The national government can also come in and assist in implementing capital development
projects which are beyond the affordability of the counties. The last variable studied was the
local revenue collection which had a positive impact on GCP. This indicates that the more the
counties collect, the better the counties became economically. Analysis of the combination of
this factors shows that management in the counties in Kenya tend towards the positive side
and needs to be supported. The national government can help by allocating more resources
and helping in implementing development projects. Donor grants can also be sought as it has
been observed that there is a reasonable degree of good county management geared towards
economic development in the counties.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
- School of Business [1411]
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