Budgetary Process and Public Debt Management in National Treasury in Kenya
Waithira, Faith Lydhies Wanjiru
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The increase in public debt without a considerable growth in the economy reduces the confidence of the citizens in their respective governments with most of them linking it to high corruption cases reported emanating from embezzlement of public resources. This finally dilutes an economy’s sovereignty by heavily depending on other countries for borrowing. Most countries such as Kenya have put in place strong measures and legal frameworks to create a good balance between debt borrowed and the level of economic growth with strong adherence to budgetary process. Despite all these frameworks, the Kenyan government has consistently revealed an expanded level of public debt that is not consistent with the rate of economic growth. The study aimed at establishing the effect of budgetary process on public debt management in the National Treasury in Kenya. Specifically, the aim of the research was to determine the effect of budget formulation, budget approval and budget implementation on public debt management in the National Treasury in Kenya. The study was guided by the following theories: New Public Management theory; Stewardship theory; and Quantity theory of money. The researcher adopted a descriptive research design and a census of all the 22 ministries as well as 10 members from the parliamentary budget committee in Kenya making the target population to be 32 for the fiscal period 2011/2012 to 2020/2021. Both primary and secondary data were used. Open ended questionnaires were used to collect primary data while secondary data was collected through a desk review of the treasury budget reports as well as the financial statements from the respective ministries for the period under study. Descriptive statistics employed the common measures of Mean and Standard deviation while inferential statistics involved correlation and regression analysis. Graphs, charts, and figures were used to present the research findings. Multi-collinearity test, homoscedasticity and normality tests were some of the diagnostic tests that were carried out in the study. To test for multicollinearity, the Variance Inflation Factor was used while plots, histograms as well as Sharpiro–Wilk were used to test normality. Before using the questionnaires, the respondents' consent and privacy was obtained, and the privacy of all collected data was secured. Majority of the respondents strongly agreed that parliament has power to approval or disapprove any budgets from MDAs that do not comply with the existing laws. Budget formulation has a significant impact on ministry spending in Kenya, indicating that the amount of money allocated to ministries determines their spending priorities and the degree to which they will carry out their mandates. The study found that budgetary implementation process has a great influence on public debt management in Kenya, disclosure on budget implementation status is one of the major reports required in end year reporting by each MDA and there are sufficient legal frameworks in Kenya that govern budgetary implementation process in Kenya is needed. The study concluded that debt formulation, debt approval and debt implementation had positive and significant effect on public debt management at 5% significant level. The study recommends that there is need for budgetary approval to be guided by accountability and transparency. The study further recommends that audit report should be guided by utmost trust and credibility to ensure good management of debt. Based on budget committee, this study recommends that the budget committee should improve on debt formulation, approval and implantation by training personnel on skills that are required for budget management process.