Why the economy is on right path

There is hope on the horizon! For those without sight of the most recent consumer index as released by the Kenya National Bureau of Statistics (KNBS), this statement may sound odd, particularly considering that the report for the first quarter of 2024 indicated that the economy only expanded by 5.0 per cent, an expansion that was reduced compared to a growth of 5.5 per cent in the corresponding quarter of 2023.

The 1st quarter 2024 growth was primarily buoyed by robust growths in Agriculture, Forestry, and Fishing activities (6.1%), Real Estate (6.6%), Financial and Insurance (7.0%), Information and Communication (7.8%) and Accommodation & Food Services (28.0%). Similar to the first quarter of 2023, agricultural production was vibrant in the corresponding quarter of 2024, owing to favourable weather conditions that supported crop and animal production during the quarter. 

This slightly reduced expansion as evident in the start of the first quarter raised some concerns particularly with the increased unrest, more commonly perceived to have been largely instigated by Gen Z. However, the resolve by His Excellency the President of Kenya, to embrace a more inclusive governance approach, even in the face of a stretched resilience among the citizenry seems to be planting some good seeds. 

Recent data indicates that Kenya is on the right trajectory as far as economic recovery is concerned. The Consumer Price Index (CPI) for September 2024 has significantly eased, with the year-on-year inflation rate dropping to 3.6%! The inflation stood at 6.8% in September 2023 and 9.2% in September 2022. However, going back to my statement that hope is here, it is important to note that this economic reality points to the need to continue with a tight macroeconomic stance in the short run, while charting a path to inclusive, productivity-led economic growth in the long run. This proposed path is in line with the nation's Medium-Term Revenue Strategy [MTRS] that will strengthen tax revenue mobilization efforts.  

The National Treasury is taking deliberate steps to drive this desired spike of growth, for example through a reinvigorated partnership with key stakeholders in the Capital Market Space such as the NSE (Nairobi Securities Exchange), Kenya Bankers Association (KBA), Capital Markets Authority (CMA) and Kenya Association of Stockbrokers and Investment Banks (KSIB). This partnership aims among others to improve the enabling policy and tax environment that will attract services. Anticipated boosters to the economic agenda include a consultatively developed Infrastructure Investment Funds Trust Bill in line with Articles 206 (2) (a) and 207 (2) (a) of the Constitution of Kenya 2010. 

Additionally, through such partnerships, the National Treasury aims to step up the liquidation of the public sector pending bills through specific action by the Cabinet Secretary of National Treasury and Economic Planning in line with section 24 (4) of the Public Finance Management Act. This will stimulate the economy via working capital injection into the affected businesses. 

In the course of my first 50 work days in office, in line with the promises I made during my vetting before Parliament (the Representatives of the People), I have taken deliberate steps to commence the journey of having a more impactful Treasury. The goodwill Kenyans, and more particularly the main market actors were willing to accord the administration as it attempted to improve on the governance has been channeled to more vibrant engagement.  It is of course not surprising that upon commencement of my tour of duty, the meetings with the Permanent Secretaries at the Ministry and the very able technical teams behind them opened my eyes to what was already in the works and sharpened my focus to what I needed to tweak so that these existing efforts can visibly and better impact the lives of Kenyans. This information was swiftly relayed to bolster some trust. 

The President of Kenya has an agenda, to make Kenyans’ very obvious hard-working spirit realize more gains. I have a task ahead, and the work has commenced. Noteworthy is the fact that loan borrowing at high interest rates has already seen a decline. This information when publicized will encourage businesses to borrow funds and more likely than not, invest in expansion. Expansion means purchase and job creation which necessarily leads to hiring and the resultant effect is the revival of a vibrant economy. 

However, it is clear that even with the lower interest rates, the return on different investments and the social costs of such investments must be taken into account. This is why the need for dispassionate discourse around PPP (Public-Private Partnerships) must be encouraged. Kenya commenced this discussion several years back and this resulted in the law (The Public-Private Partnerships Act, 2021) that we now have, which is still new and detailed discourse around its unpacking is crucial. Additionally, opaqueness must be diluted even at the risk of potentially wrestling with the often-quoted cartels that seem to dominate most aspects of public life. However, in partnership, I believe that we can move Kenya’s economy forward.

The writer is the Cabinet Secretary National Treasury