Kenya’s economic growth is expected to decelerate to 5.3 per cent this year, according to the International Monetary Fund (IMF). The predictions for growth for the preceding two years were 5.4 per cent in 2022 and 7.5 per cent in 2021, respectively.

The lender’s most recent regional economic outlook report, titled “Big Funding Squeeze,” attributes the slower growth to a cash crunch that is limiting the nation’s capacity to invest in infrastructure, health care, and education.

“Persistent global inflation and tighter monetary policies have led to higher borrowing costs for sub-Saharan African countries and have placed greater pressure on exchange rates,” it says.

In addition, IMF noted that a growing reliance on pricey market-based financing and a long-term drop in aid budgets are contributing to an increase in the interest burden on public debt.

The projections by the IMF are not too different from those of the National Treasury. In December last year, Treasury Principal Secretary, Chris Kiptoo, said the economy was projected to grow at 5.5 per cent in 2022 and 6.1 per cent in 2023.

“Considering the adverse impact of the drought conditions, inflationary pressures, and other external pressures, the economy is projected to grow by 5.5 per cent in 2022, recover in 2023 to 6.1 per cent, and maintain that momentum over the medium-term. This growth will be supported by a broad-based private sector growth, including recoveries in agriculture while the public sector consolidates,” he stated.

Global recovery

Sub-Saharan African region’s growth is estimated to slow to 3.6 per cent this year due to the global downturn, and activities are predicted to slow for a second consecutive year. Then, in 2024, it will increase to 4.2 per cent due to the predicted global recovery, declining inflation, and a slowing of monetary policy tightening.

The region will have slower growth than the previous year, when it increased by 4.7 per cent, for the second year in a row.

The IMF points out that the financial crunch would also affect the region’s longer-term prospects since governments may be forced to cut back on resources for vital development areas like infrastructure, health care, and education, which will decrease the region’s capacity to grow.

“Public debt and inflation are at levels not seen in decades, with double-digit inflation present in about half of the African countries, eroding household purchasing power and striking at the most vulnerable,” notes IMF.

According to the IMF, East African nations should do better this year in terms of their contributions to the growth of the area. It does, however, mention that a few significant economies will reduce the average SSA growth rate.

Kenya has been battling a serious cash crunch that has seen it unable to pay salaries for civil servants as most of the money has been spent on debt service as the government fights to avoid default.