Economic Drivers of Public Health Expenditure in Kenya

Health spending is a major concern in low and middle income countries due to less financing to the health sector. One of the main goals of the Kenyan government's "big four" development strategy, which is scheduled for completion by 2022 and was achieved in some few counties in 2023 is universal health care. Health has consistently been prioritized over time and has occupied a central position in political campaign platforms. The government has consistently spent huge amount of money into the health sector. In Kenya, majority of people depend on public insurance and only a very small portion of Kenyans can afford to have access to the private insurance and out of pocket payment, this has led to increased level of poverty and higher dependency ratio. Despite these efforts, Kenya continues to face challenges in effectively allocating public health expenditure with macroeconomic factors playing a significant role in influencing spending patterns. However, existing studies have not adequately examined how corruption, unemployment, and fiscal deficit impact public health expenditure in the country. This study sought to fill this gap by providing empirical evidence on these relationships. The purpose of this study was to ascertain how macroeconomic factors affected Kenya's public health spending. This study aimed to establish effects of GDP per capita, corruption, unemployment fiscal deficit and tax revenue on in Kenya. The key theoretical anchors of the study are Public Expenditure theory and Wagner’s theory. Explanatory research design was used. Secondary data from the Kenya National Bureau of statistics (KNBS) was used with annual time series data spanning from 1990 to 2023. The data was subjected to stationarity test using Augmented Dickey Fuller (ADF) test, Phillips and Perron (PP) and Kwiatkowski–Phillips–Schmidt–Shin (KPSS) for unit root test. The study employed Autoregressive Distributed Lag model (ARDL) to evaluate the relationship among the variables. The long run ARDL analysis revealed that the coefficients public health expenditure of; corruption -2.231 (p-value 0.002<0.05), per capita gross domestic product 0.001(p-value 0.02<0.05), tax revenue 0.075(p-value 0.025<0.05), and unemployment 0.227(p-value 0.03<0.05) significantly affected public health expenditure in Kenya. However, the fiscal deficit was found to be insignificant in the long run 0.008(p-value 0.914>0.05).To ensure prudent public health expenditure in Kenya, the study recommends strengthening anti-corruption laws, maintaining fiscal discipline through effective budgeting, promoting per-capita economic growth by boosting productivity and investments. Optimizing tax revenue through efficient policies and broadening the tax base is vital to fund public services. Addressing unemployment by creating jobs and investing in education is crucial for effective use of the labor force.