Kenya’s economy is expected to accelerate at 5.8% in 2020 according to the latest economic outlook by Standad Chartered
With private-sector credit growth receiving a boost from the loan rate cap removal, and recent central bank easing it is projected that the new monetary policy will help the government increase revenue collection to meet the growing fiscal debt.
A stepped-up effort to deal with delays in government payments will also help, as will the continued focus on growth-supportive ‘Big Four initiatives’. Although the recent locust invasion is a source of potential pressure on agriculture, creating a firm base for sustained medium-term growth will matter much more.
Following the loan rate cap removal, existing bank loans will not reprice higher. However, a more favourable credit growth environment should boost activity, creating more business demand for borrowing – not just for working capital purposes, but for longer-term investment
Razia Khan, Chief Economist Africa & Middle East says the key test for Kenya in the years ahead will be the strength of its fiscal consolidation intent.
” Encouragingly, authorities have unveiled plans for further cuts to discretionary spending. Revenue administration measures are already bearing fruit, with an improved record on tax collection in the recent past. While rising public debt has been a key concern – especially with the October 2019 raising of the debt ceiling to KES 9tn, from an earlier cap of 50% of GDP – a sustained and meaningful fiscal consolidation should boost confidence. Kenya’s efforts to replace expensive debt with more affordable sources of financing is encouraging. However, revenue and expenditure measures will need to drive the effort to lower fiscal deficits.”
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