Kenya’s economy is expected to grow at a lower rate, quoted at below 2.5 percent for the current fiscal year due to the impact of the Covid-19 pandemic.
“Kenya’s economic growth is expected to decline to below 2.5 percent in 2020,” Yattani said in a circular to all cabinet secretaries on the guidelines for the preparation of the 2021/22 – 2023/24 medium-term budget.
According to Mr.Yattani, the “revenue collection is likely to be adversely affected by the poor business environment occasioned by the Covid-19 pandemic.”
The CS exuded confidence that the economy would rebound to six percent in the medium term. Further, he indicated that the economic policy that would inform the proposed medium-term budget will focus on cushioning the vulnerable households through targeted economic stimulus programs.
“When the economy fully reopens, the targeted support will gradually be mainstreamed into the regular programs…aimed at safeguarding livelihoods, job creation, and economic recovery.”
According to the Treasury, interest and exchange rate stability “will be safeguarded over the medium term”. The Covid-19 pandemic has hit hard on the Kenyan economy. Thousands of businesses have shut down and at least four million Kenyans have lost their jobs.
Total revenue is expected to improve gradually to reach 16.5 percent of the GDP in 2020/21 and 18/5 percent over the medium term and total expenditures decreasing gradually to 25.2 percent of GDP in the current fiscal year and to “remain broadly unchanged over the medium term.”
Churchill Ogutu, an analyst with Genghis Capital says Treasury’s draft Budget Review Outlook Paper (BROP) has revised some key FY2020/21 budget metrics.
He notes that the ordinary revenue target has been revised lower by 110.3 billion shillings and 215.5 billion shillings in FY2020/21 and FY2021/22, respectively on the back of 41.96 billion shillings miss in the last fiscal year.
On the other hand, it has revised upwards the income tax stream to 14.4 billion shillings.