$297m package sets Kenya on the path to recovery

Planners say Kenya’s economy is set for recovery six months after the government came up with an ambitious fiscal stimulus package focused on key sectors of the economy.

Economic experts project that the initiative, worth Ksh22 billion ($297.3 million) as proposed by Finance Minister Uhuru Kenyatta in this year’s budget, could drive growth to above eight per cent in coming years, if proper mechanisms are put in place to tackle the perennial problem of corruption.

“The package was intended to address the existing imbalances in regional development, which have been a real source of social discontent.

It was thus deliberately designed to cover all parts of the country,” Mr Kenyatta said.

The programme crucially funds projects to expand irrigation-based agriculture with a view to ensuring food security.

Agriculture Minister William Ruto said the country will soon be a net food exporter as the stimulus package is also facilitating the construction of wholesale and fresh-produce markets countrywide “for the purpose of improving marketing and distribution of agricultural commodities.”

International Monetary Fund estimates show the country registering a 2.7 per cent growth this year before improving gradually to four per cent in 2010 and eventually 6.5 per cent over the medium term.

The Fund, however, says there are factors that could derail sustainable growth unless radical policies aimed at addressing them are established.

Already, the country is in conflict with the United Kingdom over the recent loss of more than Ksh100 million ($1.35 million) meant to pay for free primary education.

“In light of the risks facing the economy, macroeconomic management should remain geared towards achieving the inflation objective and promoting fiscal sustainability,” said Michel Atingi-Ego, senior adviser in the IMF’s African department, adding: “Kenya has the necessary space to ease fiscal policy and help sustain domestic demand in the face of slowing economic growth, thanks to prudent economic policies that helped reduce public debt as a share of gross domestic product.”

But global fund management company AIG says Kenya’s economy will grow by between 1.5 and two per cent this year and increase to four per cent next year due to the stimulus spending by the government.

The firm’s senior investment manager, Edward Gitahi, said enhanced credit extension by banks, a recovery in the agricultural sector and easing of the inflation will catalyse the country’s economic growth.

Analysts say the country could have recorded higher growth had the disbursement of the stimulus package not been delayed for over six months when parliament put off voting on the Appropriations Bill, which had become tied to the debate on the controversial reappointment of three directors of the Kenya Anti-Corruption Commission.