Election fever to hit economy, experts warn

CORD supporters confront policemen before they were teargased and dispersed outside IEBC offices in Nairobi. A new parliamentary report has warned that Kenya's development will stagnate or drop in the next financial year because of the 2017 General Election. (PHOTO: BONIFACE OKENDO/ STANDARD)

Kenya's development will stagnate or drop in the next financial year because of the 2017 General Election, a new parliamentary report has warned.

The team of economists, tax experts and fiscal analysts who advise MPs on the economy and the national budget policies, have warned that the political activity around the elections has made investors nervous.

They said some of the investors were reluctant to begin new projects or pump more money into existing ones, until after the elections were settled. Kenya goes to the polls on August 8, 2017. They have termed the next elections as the 'greatest challenge' to the economy.

"The election mood currently being experienced as the country is gearing itself for the 2017 elections have dampened the investment mood of the country as most investors are practicing the wait-and-see approach," reads a new report of the Parliamentary Budget Office.

The anxiety in business circles arises at a time when the country's opposition and the Government are locked in a bitter disagreement on the future of the Independent Electoral and Boundaries Commission. The opposition has been holding weekly protests to force the IEBC commissioners out of office.

However, the Government has always unleashed the might of the police force on the protestors leading to running battles, which allow looters and thieves to rob businesses in Nairobi's city centre.

"The 2017 pre-election mood has set in too early. The country will benefit more if its citizenry engage more of their time in activities for creating more wealth than those related to activism and that reduce the wealth already created leading to loss of income in some sectors," reads the report titled 'Unpacking the Estimates of Revenue and Expenditure for 2016/17 and the Medium Term'.

They say the history of the country had shown that there was always a dip at election time. The Kenya National Bureau of Statistics has data which shows that ahead of the last General Election, the economy slumped from a growth rate of 8.4 per cent, to 4.5 per cent. It was a similar case in 2007 when the economy dropped from 6.9 per cent, to 0.2 per cent as Kenya struggled with post-poll chaos.

The PBO has also slammed the Cabinet Secretary for the National Treasury Henry Rotich for being overambitious in projecting a six per cent growth rate in an election year. "Realistic macroeconomic projections underpinning any budget provide the building blocks of a reasonable resource envelope. This in turn gives credibility to the budget and avoids adjustments in the course of the year," the House economists noted in their report.

They said, "The pace of growth is therefore likely to remain, on average, on the same level as what was recorded in 2015 (5.6 per cent)." In their view, Rotich had issued a Sh2.26 trillion budget based on 'weak fundamentals' especially given the "optimistic GDP forecast amid uncertainties with regard to absorptive capacity of donor funded development expenditure".

The Parliamentary Budget Office has also said the revenue projections at a time when the economy is not growing were unrealistic. "...the Government may not be able to raise the revenue projected due to the fact that the revenue projection is premised on a higher growth trajectory" the Budget Office report notes. There are also over 1,000 projects that have to be completed.

"The slowdown in development programmes that has been caused by low revenue collection, has also brought forth uncertainty as to whether the numerous projects in the various sectors of the economy are attainable within the specified timeframe in various policy documents," the report noted.