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Kenya faces fiscal challenges in 2023

Friday, April 21, 2023

Significance

By prioritising debt repayments over salary payments (and refraining from short-term borrowing to pay salaries), the government is signalling its commitment to servicing debts while taking fiscal consolidation seriously. However, this policy is not without political consequences.

Impacts

  • The government is keen to accelerate privatisations, but some state-owned companies will require restructuring before they can be divested.
  • A March interest rate hike may be the central bank’s last as the inflation outlook has improved and the real interest rate is now positive.
  • Incoming external financing in the second quarter of 2023 will ease some foreign reserve pressures.

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