Kenya may need to recalibrate its fiscal-consolidation plans if it’s to see economic growth rebound from a five-year low reached in 2017, the World Bank said.
GDP expanded an estimated 4.8% last year. This may accelerate to 6.1 percent by 2020, more than the World Bank’s January forecast of 5.9%, as political tensions dissipate and agricultural output rebounds following good rains in the world’s biggest exporter of black tea, it said.
“The government could consider improving the efficiency of spending, public investment management; it could look at wages and salaries,” Dennis said. The measures would be “painful, but they are important,” he said.
Kenya could employ measures to stimulate the private sector’s contribution to GDP, which has declined for four years, the bank said. The introduction of interest-rate caps in late 2016 caused lending to grind to a near halt, spurring the International Monetary Fund to warn that growth could suffer if the laws aren’t toned down or scrapped. The Treasury has acknowledged that the limits haven’t worked as intended and has said it will introduce legislation that will either abolish or modify the law so banks can better price loans for riskier customers, while bolstering rules to protect consumers.
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The World Bank proposed setting up a regulatory environment and incentive structure to facilitate the flagship infrastructure projects — such as those proposed in the government’s so-called Big Four agenda — through public-private partnerships.
The development program seeks to ensure food security and agricultural productivity, affordable housing, increased manufacturing, and universal health coverage by 2022.