IMF revises Kenya’s growth to 6.3 per cent on increased infections

Contractors work along the stretch of Kisumu-Mamboleo Road ahead of this year’s Madaraka celebrations in Kisumu. The country will now receive its second installment of Sh43.9 billion from IMF. [Washington Onyango, Standard]

The International Monetary Fund (IMF) has revised its growth outlook for Kenya’s economy this year downwards to 6.3 per cent citing the continued ravages of the Covid-19 pandemic.

Earlier, the IMF had projected the country’s economy to grow by 7.6 per cent this year on the back of a rebound in education as schools re-opened in the fourth quarter of 2020.

Schools have since been fully re-opened. However, with the country still grappling with the negative effects of Covid-19, the Washington-based institution has been forced to climb down on its growth prospects.

The IMF reached this conclusion following a virtual staff meeting aimed at reviewing the Sh253 billion programme that it has with Kenya. The IMF team which met senior Treasury and Central Bank of Kenya officials was led by Mary Goodman.

Ms Goodman noted that the persistence of the pandemic suggests the pickup envisioned in 2021 will “be slightly less strong than anticipated.”

“IMF staff now project the economy to expand by 6.3 per cent in 2021. The coronavirus shock has unfortunately also reversed some of the poverty reduction gains Kenya achieved in recent years and debt remains elevated,” said Goodman in a press statement released yesterday.

Following the meeting, the IMF staff and the Kenyan authorities reached an agreement - setting the stage for the country to receive its second installment of Sh43.9 billion.

The disbursement is subject to the approval of the IMF management and the executive board in the coming weeks.

Just coming from a disruptive third wave of Covid-19 infections that saw the government enhance the containment measures, health officials are once again predicting the fourth wave in July.

This means that the economy is not yet out of the woods. The rollout of the vaccine programme, a prerequisite for economic recovery, has largely been unimpressive with only 933,826 people vaccinated against a target of 1.2 million by end of June.

Last year, the economy is estimated to have grown by less than one per cent with Treasury putting it at 0.6 per cent. Some forecasters found that the size of the economy or Gross Domestic Product (GDP) shrunk.

The Kenya National Bureau of Statistics (KNBS) has delayed the release of a report highlighting the economic performance last year, blaming it on Covid-19 which saw a delay in the collection of some data.

On June 10, next month, the Cabinet Secretary for National Treasury Ukur Yatani will read a Sh3.6 trillion budget which is expected to help the economy recover from the Covid-19 blues.

Infrastructural projects

A lot of the capital-generating projects will include the mega infrastructural projects and the Big Four Agenda which includes manufacturing, food security, universal healthcare and affordable housing.

In total, the Big Four will get Sh135.3 billion in the next financial year.

Under the IMF’s programme, the country is expected to reduce its debt vulnerabilities by increasing its revenues and cutting its expenditures, a situation that is likely to increase the tax burden for a lot of Kenyans.

This is as the Kenya Revenue Authority aggressively goes after tax cheats. Moreover, some fledgling State-owned enterprises will be restructured, raising fears of massive retrenchments reminiscent of the 1990s style structural adjustment programmes (SAPs).

“The authorities are also developing a strategy to assess and manage risks to the budget from State-owned enterprises, leveraging results of their ongoing financial evaluations of those firms facing the greatest challenges.”

The IMF also lauded Kenyan authorities for their continued push to increase transparency and fight corruption. “They will shortly publish an audit of all Covid-19 related expenditures in financial year2019/2020,” said the IMF in a press release.

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