Kenya is projected to record a 4.7% economic growth this year on account of higher prices of exported food commodities according to the World Bank.
In January Global Economic Prospects, the World Bank has maintained its earlier projection in June last year despite revising the 2023 GDP projection which the lender has slashed to 5.1% from the earlier forecast of 5.8%.
According to the lender, the growth this year will be driven by high prices for food commodities like coffee and cotton which is expected to benefit agricultural exporters.
“However, for some countries, expansion of agricultural activities will be constrained by a variety of uncertainties, including droughts and lower than average rainfall as well as intensifying conflict,” said the World Bank in the report.
This growth however is being threatened by risks such as debt sustainability challenges which the bank says “may lead to reduced access to external funding, forcing abrupt fiscal adjustment.”
Kenya is increasingly under pressure to embark on efficient fiscal management policies amid budgetary constraints as the debt burden mounts.
The Parliamentary Budget Office has already projected public debt to rise by at least Kes. 800 billion by end of the current financial year as a result of the widening deficit leading to the possible amendment of the Public Finance Management Debt Ceiling of Kes. 9 trillion.
“As such, given it is estimated that only up-to Kes. 200 billion of the FY 2022/23 fiscal deficit is financed. Without an amendment to the ceiling, it would imply that the fiscal deficit for FY 2022/23 is naturally capped at the remaining fiscal space provided by the ceiling and balanced budgets have to be maintained over the medium term.” the Office warned.
Kenya will spend Kes. 1.36 trillion equivalent to 63% of projected revenue in the current fiscal year to service the current public debt which stands at Kes. 8 trillion.
In Jan to Sep 2021, total exports increased by Kes. 63B or 13.2% to stand at Kes. 543 billion compared to Kes. 480 billion in the same period in 2020 driven by coffee, horticulture and textiles.
Kenya growth is also pegged on vaccination rates amid the emergence of COVID-19 variants which the multilateral lender says could trigger recurrent disruption, amplify past development and health challenges, derail structural and fiscal reforms resulting in lasting human capital losses.
“While there are welcome signs of global recovery, the pandemic continues to inflict poverty and inequality on people in developing countries around the world including Kenya. Globally coordinated efforts are essential to accelerate vaccine distribution and debt relief, particularly for low-income countries. As the health crisis eases, policymakers will need to address the pandemic’s lasting effects and take steps to spur green, resilient, and inclusive growth while safeguarding macroeconomic stability,” said World Bank Group President David Malpass.
Kenya currently has 18.6% of the adult population fully vaccinated. Sub-Saharan Africa is projected to grow 3.6% this year and 3.8% in 2023.
Within the East African Community, Rwanda is forecast to grow at the highest pace of 7.1%, followed by Tanzania at 5.4%, Uganda at 3.7%, Burundi at 2.5% and South Sudan 1.2%.
