Kenyan economy wraps up 2019 on an optimistic note

In the wake of tough macro and micro-economic prospects, the Kenyan economy is wrapping up the year 2019 on an optimistic note.

However, soaring debt levels and missed revenue targets coupled with a destructive rainy season spell doom for an economy which is expected to expand by 6 per cent at the close of this decade.Despite increased investments in infrastructure the country still faces the challenges of inadequate infrastructure, the disparity in incomes, and high poverty worsened by high unemployment never mind the glaring shocks emanating from climate change and insecurity.

conomic expansion is projected at 6.0% in 2019 before accelerating to 6.1% in 2020.

This growth is expected to be driven by improved business confidence and continued macroeconomic stability while tourism and the strengthening global economy will contribute to enduring growth.

In the year 2019, Kenya’s debt levels spiralled to almost 60 per cent of the GDP, leaving the country with no headroom to borrow more funds.

According to the Central Bank of Kenya, the country’s public debt to GDP currently stands at 59.9%, above the 50% threshold which had been approved by the National Assembly.

This forced the National Treasury to seek parliamentary approval to raise the ceiling to 9 trillion from 6 trillion shillings.

The new debt ceiling now gives the Treasury the green light to borrow money which almost matches the size of the current budget.

The country is already spending more than 40 per cent of total revenue to service outstanding debts.

The International Monetary Fund recommends a threshold of 30 per cent for emerging economies.

To deal with persistent corruption and money laundering, CBK announced the introduction of new notes in June, giving the 1000 old notes up to September before they are rendered worthless.

However, when the operation was concluded on September 30th, old series Ksh1,000 notes valued at Ksh.7.4 billion had not been exchanged rendering them worthless.

In September the leadership of the National Treasury was thrown off balance after the arrest of Cabinet Secretary Henry Rotich, Principal Secretary Kamau Thugge and other high-ranking treasury officials.They were charged by the Ethics and Anti-Corruption Commission for embezzlement of public funds, corruption among other economic crimes.

The government plans to continue fiscal consolidation to restrain the rising deficit and stabilize public debt by enhancing revenue and reducing the cost of debt by diversifying funding sources.Inflation is projected to be maintained at 5.5% in 2019 and 5.4% in 2020 due to prudent monetary policy.

And after three years of operation credit constraints to the private sector as a result of interest rate cap, the controversial law was finally repealed when President Uhuru Kenyatta assented to the Finance Act 2019.

The controversial law was introduced in September 2016 in the Banking Act to rein high-interest rates banks were subjecting to consumers.