Kenya is expected to register a 5.3pc economic growth this year as treasury continues with fiscal consolidation to address debt vulnerabilities.
The projection for this year is expected to outpace last year’s growth which slowed to 4.6pc from an actual growth of 5.6pc reported in 2023 on what is due to depressed activities in the first three quarters and reduced private sector credit to key sector
According to the National Treasury and Economic Planning Cabinet Secretary John Mbadi, this year’s growth will be supported by key sectors such as agriculture and services sector.
“Growth is expected to pick up to 5.3pc in 2025 and retain the same momentum over the medium term largely driven by enhanced agricultural productivity, resilient services sector and ongoing implementation of Bottom-up Economic Transformation Model (BETA),” says Mbadi in the 2025 Budget Policy Statement.
Treasury expects favourable weather conditions and ongoing interventions such as fertilizer subsidy programme to support agriculture sector with an average growth of 3pc. On the other hand, services sector is projected will record an average growth of 6.6pc over the medium term as that of industrial sector grows by 2.2pc this year and 3pc over the medium term.
Mbadi says the budget for the fiscal year 2025/26 which will focus on fiscal consolidation targets to ensure there is enough fiscal space to deliver public goods and services.
“Fiscal consolidation will be supported by concerted expenditure rationalization and revenue mobilization efforts. This will bring public debt on downwards path consistent with Kenya’s debt anchor,” he added.
This comes amid persistent revenue pressure where treasury plans to roll out measures to fortify collection which has been hurt by slowdown in economic activities leading to missed targets especially in the current fiscal year.
“Budget implementation in the first quarter of FY2024/25 was impeded by protests that led to a slowdown of economic activities, the withdrawal of Finance Bill 2024 that was expected to raise an additional revenue amounting to Ksh 344.3 billion and the implementation of the Collective Bargaining Agreements has continued to put pressure on the expenditures,” stated Dr Chris Kiptoo, Principal Secretary for National Treasury.
In six months of the year to December 2024, Kenya Revenue Authority (KRA) missed its collection by Ksh 107.6 billion after collecting Ksh 1.33 trillion against a target of Ksh 1.44 trillion.
“Revenue shortfalls and emerging expenditure pressures is affecting our ability to execute the FY2024/25 budget in a timely manner leading to cash flow challenges and associated build-up in unpaid bills,” added Dr Kiptoo.
In the FY2025/26 overall expenditure and net lending are projected at Ks 4.26 trillion comprising Ks 3.096 trillion in recurrent expenditure, Ksh 725.1 billion for development, Ksh 436.7 billion for county governments and Ksh 5 billion for Contingency Fund.
