The Effect of Government Expenditure on Fiscal Deficits in Kenya

Abstract

In many economies world over, accountability and transparency as well as fiscal discipline in public expenditures take priority as the main catalysts to economic growth. However, large fiscal deficits have been reported in most developing countries which lead to inflation and currency devaluations. In this case, Kenyan government is no exception as its expenditures are consistently way above its revenues. This study therefore attempted to assess the relationship between government expenditure and fiscal deficit in Kenya. This study used a causal research design. Secondary data was obtained from the financial records of National Bureau of Statistics, The Economic Surveys, Kenya Institute of Policy Analysis and Research (KIPRA) and the Institute of Policy Analysis and Research (IPAR) ranging from year 2004/05 to 2010/11. Regression model was used to estimate the effect of government expenditure on fiscal deficits. The study established that a unit increase in government expenditure, increases fiscal deficit of GDP. The study recommends that the government of Kenya should come up with strong working policy to regulate the expenditure of its resources.