Photograph — Kenya Safari

Kenya’s economy is expected to grow by less than 2.5 percent this year, Kenya’s financial minister Ukur Yatani said during a virtual event held to launch budget-making for the 2021/22 financial year.

At the launch, the minister revealed a 10 percent drop in government revenue from August taxes, partly due to tax cuts announced in April to support consumer demand in the face of the pandemic. Yatani warns that the coronavirus crisis is likely to cause a major economic shock, due to loss of jobs, contraction in tourism, and a drop in government revenues.

Prior to the pandemic, Kenya’s Gross Domestic Product was projected to grow by 6 percent this year and 6.2 percent in 2021 with macroeconomic stability expected to continue. Inflation was expected to be around 5 percent while fiscal deficit narrows, according to the African Development Bank (AfDB).

The projected growth was based on favorable weather, increased crude oil production and exports, continuing foreign direct investment, the benefits of the African Continental Free Trade Agreement, and the government’s commitment to the Big Four Agenda aimed at industrialization in health, housing, agriculture, and manufacturing.

With the pandemic in place, Yatani says Kenya’s economy will grow at a much slower pace of between 1.8 percent and 2.5 percent this year. Health policy measures such as working from home, travel restrictions, the closure of schools, the suspension of public gatherings, and a nightly curfew, have proven to be costly to the economy as social interaction, production, and demand across all sectors have been reduced.

More so, the tourism sector is expected to contract by 18.7 percent this year and 9.1 percent next year, before it starts to grow slightly in 2022. But Treasury has said the finance ministry will target a fiscal deficit of 7.3 percent of GDP in the 2021/22 (July-June) financial year, slightly down from the current deficit of 8.4 percent.

Kanini Kega, the chairman of parliament’s budget committee, has warned officials against taking budget plans lightly, normally in the form of additional requests for cash during a given financial year, after the budget has been approved.

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