New roads, rail links to help spur Kenya economy

NAIROBI: Kenya’s drive to improve rail, roads and power plants will help spur economic growth to 6.9 per cent in 2015 and 7 per cent in coming years, its finance minister has said.

Henry Rotich also told the Reuters Africa Investment Summit the government would remain “active” in the international capital markets after its oversubscribed Eurobond debut last year, but did not give details of new issues. As well as infrastructure development, Kenya’s economy would benefit from the drop in global oil prices, which would spur the manufacturing sector and lift consumption, he said.

“There is a lot of economic activity and potential growth in almost all sectors is tangible,” Rotich said.

However, he said the outlook still remained susceptible to security concerns. A number of militant attacks in East Africa’s biggest economy over the past two years, blamed on Al Shabaab insurgents, has dented earnings from the country’s tourism sector, a key source of foreign exchange.

Hiccups in agriculture could also affect the economy, he said. Farming contributes a quarter to annual economic output. “The perceived insecurity risk dampens the tourism sector and depressed rainfall could affect exports and agriculture,” Rotich said.

Kenya’s economic growth, which peaked at 7.1 per cent in 2007, has fallen to an estimated 5.3 per cent last year.

Current account deficit

Government officials are racing to improve transport networks and build new power plants to boost growth, after decades of underinvestment. China is financing a new Sh327 billion railway from the port of Mombasa to the Ugandan border to boost links to regional trading partners. Uganda is looking to extend the line to Rwanda.

Improved transport links could also see the country import more, meaning the current account deficit would likely persist even as a weaker oil price cuts the cost of oil imports, the minister said. The current account deficit is expected to widen to 8 per cent of GDP in the fiscal year ending June 2015, from 7.6 per cent a year earlier, ratings agency Fitch said in January.