Treasury now cuts growth forecast to 5.5 per cent

The Treasury building in Nairobi Photo:Courtesy

Kenya lowered its 2017 economic growth forecast to 5.5 per cent due to drought and political uncertainty, a top official has said, as the Government cut non-essential spending to free up funds for a repeat presidential election.

The drought earlier this year hurt agriculture, which accounts for 30 per cent of output, said Kamau Thugge, the Principal Secretary in the ministry finance.

He said some investors are also delaying decisions after the Supreme Court nullified the results of an August 8 presidential election citing irregularities in the tallying process.

A repeat poll pitting President Uhuru Kenyatta against opposition leader Raila Odinga is scheduled for October 17. Odinga says he will not participate unless demands are met, including the resignation of some staff from the electoral board.

POOR PERFORMANCE

Kenya has the highest per capita income in the region and is known for its capitalist tradition, stability and role as a Western ally. It hosts the regional headquarters of several global firms.

The government had initially projected a 5.9 per cent growth for this year but the economy expanded 4.7 per cent in the first quarter, mainly due to poor agricultural performance.

Thugge said growth would rise to 6.5 per cent per year in the medium term.

“This is contingent on having good weather,” he told a meeting convened to discuss budget preparations on Friday.

The government’s revenue collection for the fiscal year starting July was behind target by Sh29 billion, he said. The revenue target is Sh1, 549.4 billion for the fiscal year. “There is a shortfall in customs. There may be people waiting before they import things,” he told Reuters on the sidelines of the meeting.

Adding to the squeeze, the electoral board has requested Sh12 billion for the polls.