Government projects 4.9 pc economic growth

By David Ochami

Kenya’s economy is projected to grow by 4.9 per cent in the next financial year.

Finance Assistant minister Oburu Oginga presented this projection in Parliament yesterday in fulfilment of new Standing Orders and the Fiscal Management Act 2009.

But in the next financial year the Finance ministry projects a budget deficit of Sh153 billion with Sh51.6 billion of 1.8 per cent of the total budget expected from donor funding.

Some 3.6 per cent or Sh11.9 billion will be financed through domestic borrowing.

Dr Oburu gave the first Budget Policy Statement in which the Government seeks to promote growth in tourism, research, governance, agriculture, rural development, public administration, water, and irrigation development.

The statement shows that expansion of the private sector will contribute significantly to this growth as the Central Bank pursues a monetary policy targeted at low inflation of around five per cent.

Foreign-funded

The statement argues that besides controlling inflation and reducing the budget deficit, growth in the next financial year will be determined by a Medium Term Plan.

The plan will be implemented only when foreign aid is confirmed. It also involves maintaining revenue to Gross Domestic Product (GDP) ratio within the range of 21 to 23 per cent raising the amount of foreign-funded projects and building Kenya’s foreign exchange reserves from 3.3 months of import cover at the end of December last year to an average of 4.0 month of import cover in 2012/2013.

This guiding framework, according to the deputy minister will provide basis for macro-economic stability, steady economic recovery, competitive and realistic interest rates, stable exchange rates as well as reduction of public debt to GDP ratio over the Economic Recovery Strategy.

"Maintaining prudent fiscal policy will be critical to attaining the 4.9 per cent growth target," says the statement that also targets a to collect Sh629 billion from taxation.

Negative trend

Prime Minister Raila Odinga will Thursday address Parliament on the implementation status of the Sh22 billion Economic Stimulus Package.

A Parliamentary committee has complained about delay in implementing the policy but recommended the fund’s expansion in the next financial year.

Finance Minister Uhuru Kenyatta announced several Economic Stimulus packages in the 2009/2010 Budget intended to spur economic growth and reverse the negative trend engendered by drought and the post-election crisis.

In the packages, slightly over Sh100 million was allocated to each constituency as a conditional economic stimulus or resilience package towards financing infrastructure development, covering education, health care and other development projects.

The troubled Kazi kwa Vijana scheme is part of the stimulus package.