We must cut down on borrowing and focus on reducing deficit

In the past two years, Kenya has become a favourite destination of world leaders, often accompanied by large delegations of businessmen and entrepreneurs. The country has seen leaders of China, US, Germany, South Korea, Turkey and other major countries in the past year, with most signing important bilateral agreements. The President has also been globe-trotting to many capitals of the world marketing the country’s business opportunities, often accompanied by large groups of businessmen too. Kenya has also become a hotbed of international trade and development conferences, after hosting WTO and the Global Entrepreneurship Summit among several others lined up this year too.

Nairobi was the top Foreign Direct Investment (FDIs) destination in Africa last year, taking up to 12 per cent of all inflows. The popular Fortune magazine voted Kenya as one of the seven best investment destinations in the world that includes India, Malaysia, Indonesia, Mexico, Poland and Columbia, saying ‘few countries offer better destinations than Kenya’. Kenya has also been cited as the most attractive market for mergers and acquisitions in Africa. More significantly, the World Bank ranked it as the third most improved in business regulatory reforms globally. On global competitiveness in the economic arena last year, Kenya ranked ahead of the continent’s largest economy, Nigeria although South Africa still remains the most competitive.

So, what is attracting the world economy to Kenya? Our economic growth has averaged above 5 per cent in the past few years, and has remained resilient despite external shocks. The government has invested substantially in ICT, infrastructure and energy sectors to attract investors. The Chinese for instance, have come in big on the SGR and infrastructure; other investors have been attracted by real estate, energy and ICT. Kenya has also shrugged off bullish EAC competition and branded itself as a major financial hub, and an economic powerhouse in the region. Not lost on other investors is the potential for hydrocarbons and minerals in the country in the near future.

It also seems the country’s investment and business attractiveness has not been dimmed by rising political rhetoric and potential security threats often portrayed as political instability in developed countries. The global rating agency has downgraded the country’s sovereign credit rating to ‘B’ largely due to high fiscal deficit and mounting debts. Early this year, PriceWaterHouse Coopers ranked the country as the third most corrupt in economic crimes. This was based on a survey of international business executives, who also expressed concern over low level of confidence in local law enforcers’ ability to investigate and prosecute economic crimes. International investors have shrugged off all these concerns and moved their funds into Nairobi.

But as the government pursues expanded international trade and growth, it must deal with inclusiveness and inequality in the economy, and address the lack of opportunities for youth in order to boost the people’s living standards. According to AfDB African Economic Outlook 2016, African countries must keep debts at sustainable levels. IMF has already raised concern about further borrowing by the government as the latter eyes additional sovereign bonds. Government should temper its appetite for more debt and prioritise its spending to cut its deficits.