Thursday, March 22, 2018
Kenya budgetary and fiscal outlook.
In February, the government released its 2018 medium-term budget policy statement (BPS), which fleshed out the strategies for achieving President Uhuru Kenyatta’s ‘Big Four’ policy priorities -- his major legacy-setting development agenda for his final term in office. The BPS signals a shift from the administration’s previous heavy focus on public sector-led development to greater private sector involvement, as well as an emphasis on providing basic social goods. This stance could also support plans to reduce the fiscal deficit to 3% of GDP by 2022. However, prospects for success will depend on whether the government delivers on promises to review stifling caps on commercial lending rates.
- Better fiscal metrics among East African peers may push Nairobi to speed progress towards the bloc’s macroeconomic convergence criteria.
- The apparent truce between Kenyatta and opposition leader Raila Odinga could help cement resurgent business sentiment.
- The government will be the proximate beneficiary of interest rate cuts as it struggles with a debt-service ratio of 54% of export revenue.