Transcript fiscal policy reforms for an inclusive green economy

FISCAL POLICY REFORMS FOR AN
INCLUSIVE GREEN ECONOMY
“KENYA EXPERIENCE”
Presentation During a Regional Workshop on
“ Inclusive Green Economy for Poverty Reduction and
Sustainable Development in Africa: From Inspiration to Action” Cairo Egypt28thFeb-1st March, 2015
by
Peter O. Odhengo, Senior Policy Analyst,
The National Treasury KENYA
Presentation Outline
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Introduction
Ongoing major fiscal reforms aimed at promoting
green investments in Kenya
Implications of the reforms
Institutional arrangements for the reforms
Challenges and safe guards
Introduction
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In Kenya, growth prospects: remain
strong,
 inflation has been contained at single digit,
 interest rates are trending downwards,
 exchange rate is broadly stable,
 public debt remains sustainable and
 both fiscal and external buffers have been
strengthened, despite the downside risks associated
with the sluggish global recovery
Cont’..
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The resilience built over the year on account of
sound macroeconomic management has helped to
sustain growth.
The economy rebounded from 0.2 % in 2008 to 8.4
%in 2010, before slowing down to 6.1 % and 4.5
%in 2011 and 2012, respectively.
In 2013, the economy grew by 5.7 % and 5.3 % in
2014 respectively,
It expected to rising to 6.9 percent in 2015 and 7.0
percent over the medium.
Fiscal Policy Reform Environment
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Kenya’s economy is highly dependent on its natural
resource base;
This makes our country highly vulnerable to climate
change, and threatens our Vision 2030 goal of creating
a globally competitive and prosperous nation with a
high quality of life;
Addressing climate change requires that we transform
our economy by reforming our fiscal policies to bring in
paradigm shift to promote green investments across
multiple sectors.
This will lower greenhouse gas emissions, reduce
economic shocks and deliver poverty reduction gains.
Fiscal Reforms
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Removal of inefficient and environmentally harmful
subsidies is one of the most promising avenues to promote
transition green economy.
Energy subsidy reforms —removing both direct subsidies
and implicit subsidies from the failure to charge for
environmental externalities —could generate significant
revenues for fiscal consolidation, lowering other burdensome
taxes, or funding green investments i.e. introduction of FiT,
Well targeted “green fiscal reforms” are able to
discourage excessive energy consumption and generate
additional resources for green investments – green taxation
Cont’
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Fiscal consolidation- the need to push forward on
financial oversight and regulation, and the
importance of comprehensive structural reforms to
support green economy and growth
Major Challenges
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There are many challenges affecting reforms: Lack
of political good will for imlementation,
 Inclusiveness and social integration
 De-risking green investment
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Active participation of the private sector.
Sustaining political stability beyond the ideological
strife;
Increased conflicts on scarce natural resourcepasture, water, etc.
Cont’..
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Barriers to introduction of new financial mechanisms
e.g. introduction of green bond
Lack of human and institutional capacity,
Standards and enforcement
Mitigation Measures
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Prudent monetary policies-have reduced inflation
and built foreign reserve buffers,
Fiscal reforms – bolstered by debt relief – have
reduced budget deficits and lowered public debt.
This has greatly helped the country to deal with the
external and domestic shocks;
Financial inclusion is advancing rapidly, giving
millions of people a stake in the economiclandscape-Mpesa
Cont’..
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Amendment to the PFM Act, 2014 –for increased
accountability and reduction of corruption;
Policy measures to Improve Management of Public
Resources;
Raise the efficiency and quality of public spending
Development of Green Economy Strategy and
Implementation Plan to drive transformation to low
carbon-green economy pathway
Proposed introduction of Green Bond to mobilize
resources for green investments through NSE
Fiscal policies targets to the newly created devolved
units with clear requirement for green growth agenda
Mitigation Measures
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Ongoing fiscal decentralization provides which
opportunity to improve accountability and the
quality of service delivery, but its success will
depend on building capacity at the county level
Anchoring economic stability through sound fiscal
and monetary policies and market-oriented reforms
Institutional Arrangements
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PFM Oversight Institutions:
Good progress has been achieved in strengthening
the institutional capacity of the public financial
management oversight agencies to: ensure
efficiency,
 effectiveness,
 transparency and
 accountability in the use of public finances.
Cont’..
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Going forward
Further capacity building and system development will
be undertaken in:The National Treasury,
 Office of Controller of Budget,
 Office of the Auditor General and
 Public Procurement Oversight Authority.
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The four oversight agencies undertake capacity building
actions for timely financial reporting to national and
county governments in order to enhance transparency
and accountability.
ASANTE SANA