Kenya - Second Program for Strengthening Governance for Enabling Service Delivery and Public Investment in Kenya - Additional Financing

Overview & Synopsis

The development objective of the Second Program for Strengthening Governance for Enabling Service Delivery and Public Investment in Kenya for Kenya is to enhance revenue mobilization and deepen accountability and transparency in public finance management at the national government level. The additional financing responds to binding constraints that emerged during implementation—namely a revenue mobilization ceiling despite widespread system rollout, persistent expenditure inefficiencies in cash and liability management, and an integrity deficit undermining fiscal gains—within a macroeconomic context of elevated debt, pending bills, and Financial Action Task Force Grey List status. Building on the parent Program-for-Results and in explicit complementarity with the Second Kenya Fiscal Sustainability and Resilient Growth Development Policy Operation, the operation introduces six new disbursement-linked indicators that shift the focus from system adoption to verifiable fiscal and governance outcomes, and a small Investment Project Financing component for upstream public financial management information technology enterprise architecture and interoperability support. The program will work across three tracks: first, revenue measures to increase personal income tax compliance among non–Pay As You Earn filers through the Kenya Revenue Authority, expand non-tax revenue via real-time reconciliation and additional service onboarding on the government’s digital platform, and institutionalize tax expenditure reporting and rationalization through the National Treasury; second, expenditure efficiency and liability management to reduce Central Bank overdraft charges and idle balances through full Treasury Single Account use and real-time cash visibility, improve operations and maintenance tracking through the Integrated Financial Management Information System asset module, strengthen pension processing through an electronic pension management system, and consolidate external, domestic, and state-owned enterprise debt data through a public debt data warehouse; and third, governance enablers to operationalize the Conflict of Interest Act through an automated wealth declaration platform at the Public Service Commission with cross-referencing to financial databases and to complete beneficial ownership and politically exposed persons items led by the Financial Reporting Centre, while improving budget credibility by operationalizing performance-based budgeting in health and education and reducing school audit turnaround times under the Ministry of Education Directorate of School Audits. The project intends to increase tax and non-tax collections, generate measurable savings from better cash and asset management, improve pension and debt data integrity, strengthen conflict of interest prevention, and enhance transparency through regular publication of non-tax revenue, consolidated debt, and education audit reports.