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Kenya prioritizes Agriculture as one of 4 pillars of the economic recovery plan

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By Steve UMIDHA

Agricultural makeover remains a bright spot for the Kenya Kwanza government, which has also listed the digital economy, climate change, and green actions, as well as infrastructure growth as other stimuli for economic recovery this year.

In its macroeconomic review for the 2023-2024 budget and medium-term presentation, the national treasury said yesterday that the above sectors, including manufacturing, services economy, creative economy, and MSMEs would support the recovery agenda whose implementation was underway.

“This is where properly functioning markets will support the recovery agenda. The Government has started to implement the Development Agenda – the bottom-up approach that is geared towards economic turn-around and inclusive growth,” said the National Treasury and Economic Planning PS Chris Kiptoo.

Further adding that the priority sectors would be implemented in tandem with the IMF – backed economic recovery program, which among other factors calls for the strengthening of Kenya’s COVID-19 response and maintaining support for those most impacted by shocks to the economy as a condition to continue lending the State.

Similarly, the World Bank’s financial lending arm wants the government to cut down on its debt vulnerabilities through a revenue-driven fiscal consolidation plan aimed at stabilizing public debt estimated to be almost 70 percent of the gross domestic product.

In a statement announcing the approval of the $2.34 billion loan to Kenya, IMF last year singled out nine key loss-making parastatals that it felt should undergo a major overhaul to stop bleeding the public purse.

The National Treasury noted at the time that after a thorough financial assessment, several public enterprises including Kenya Airways, Kenya Railways Corporation, Kenya Power, and three public universities among others had an outstanding Sh170 billion in government-guaranteed debt as of December 2020.

Also on the list were the Kenya Broadcasting Corporation (KBC), Athi Water Works Development Agency, and Kenya National Examinations Council, as well as Kenya Wildlife Service, Kenya Post Office Savings Bank, Kenyatta National Hospital, and East African Portland Cement.

The Treasury analysis established that these state agencies had an estimated liquidity gap of Sh382 billion over the next five years.

The International Monetary Fund gave the ultimatum as part of its condition to loan Kenya $2.34 billion (Sh280b) granted in April 2021.

Appeals to privatize some of the loss-making entities like national carrier Kenya Airways (KQ), Kenya Postal Corporation (Posta), and Mumias Sugar Company Ltd among other parastatals, have been on the cards for years now – but experts privy to the tedious tasks involved in the privatization procedure, are convinced that such plans may continue to remain just that, plans.

“Privatization process often follows a lengthy and detailed process before the sale can be implemented. This results in the process being time-consuming and puts off private investors given the uncertainties it presents,” Sammy Ndolo, managing partner at Cliffe Dekker Hofmeyr said.

It remains to be seen how the current administration will navigate through its ambitious economic growth plans even as it aims to pursue unorthodox fiscal consolidation strategies such as tax raises to preserve debt sustainability.

“This will be achieved through enhancing revenue collection and suspending expenditures in some recurrent areas such as domestic and foreign travels, among other areas,” said Kiptoo.

In its efforts to grow revenues to 17.8 percent of GDP in the current financial year from 17.3 percent of GDP in the previous fiscal year with a target of 18.0 percent of GDP, the government through the Kenya Revenue Authority (KRA) has already embarked on the implementation of a new web-based improved VAT system expected to net tax cheats as well as tax leaks in betting and gambling as well as rental property sectors.

In the first five months of FY 2022/23, for instance, the total revenue performance fell below target by Sh19 billion, with ordinary revenue recording a shortfall of Sh32.2 billion.

“This shortfall needs to be recouped to avoid hampering budget execution. Efforts are underway between the National Treasury and KRA to close the gap,” noted Kiptoo.

 

Stats:

-Kenya’s agriculture sector – one of the sectors yet to fully recover from the effects of the global lockdown, for instance, continues to play a critical role in Kenya’s economy accounting for 20 percent of the Gross Domestic Product (GDP), employing over 40 percent of the total population and more than 70 percent of the rural populace.

-On Tuesday President William Ruto announced the creation of a State Department for Environment and Climate Change to be domiciled in the Ministry of Environment to underline the government’s commitment to protecting Kenya from the adverse effects of global warming.

– Kenya Kwanza government aims to digitize over 5000 government services within the next six months as part of its plan to grow the Digital Economy Blueprint –a framework that promises to improve Kenya’s economic growth, including an expansion of business opportunities for Kenyan businesses as well creating new employment opportunities.

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