NAIROBI, Kenya, Feb 23 – Finance Minister Uhuru Kenyatta on Monday said that the Kenya’s economy grew by between two and 2.5 percent in 2008, according to provisional estimates.
During the opening session of the public sector hearing for the budget process, he attributed the slow growth to the post-election crisis and the global economic meltdown.
“Provisional estimates of our gross domestic output show that growth may have edged up by around two to 2.5 percent in 2008,” he said.
“Other external developments such as droughts, exceptionally high oil prices, and the meltdown of the world economy associated with the global financial crisis, caused even more damage to the economy,” he added.
The government had last year forecast that the growth would be anything between 4.5 and six percent for 2008, but was to review it this January to 3.5-4.0 percent.
Mr Kenyatta however said that the poll violence which rocked the country in January and February 2008 affected the agriculture and transport sectors, which in turn impacted adversely on other sectors of the economy.
“This good economic story was in 2008 interrupted largely by our own misadventure,” he described.
The Deputy Prime Minister said that the government would have to look for more funding from the domestic market to fill the gap left by the absence of external donor funds.
He said external financing of the budget from traditional donors may not be forthcoming due to the global financial crisis that has led to many leading markets going into recession.
“External sources of financing our budget are constrained as a result of the global financial crisis. Equally, other options like floatation of the sovereign bond is also not a viable option under the current climate in the international capital markets,” explained Mr Kenyatta.
He said Kenya’s government may increase budget spending by 7.4 percent in the next fiscal year.
The Finance Minister meanwhile also launched the indicative programme-based budget for the 2008/09 financial year suggesting that expenditure may increase to Sh627.9 billion in the 12 months to June 30, 2010, compared with Sh584.5 billion in the previous year.
“To bring back the economy to a high growth trajectory as envisaged in the vision 2030, we are convinced we will need to tap more of our domestic resources and in particular put more emphasis on the private sector,” he said.
He cited a World Bank report, which says that the government has to spend Sh166 billion annually on roads, for the next five years.
He said that the government would put more emphasis on structural and regulatory reforms to scale up Kenya’s investment climate and the public finance management reform programme.
“As part of this programme, measures will be taken to improve further efficiency in revenue administration in order to generate more revenue administration, to generate more revenue without requiring to raise tax rates,” the Deputy Premier told stakeholders attending the forum.
The Finance Minister said government revenues might be affected due to reduced tax collection, but said the authorities were aiming to offset any losses by acting firmly against corruption.
Graft within the tax administration system and other parts of Kenya\’s economy is widely believed to cost the government billions of shillings every year.
"Governance is a challenge but we are committed to fight corruption. It causes leakages of public resources that we need," Mr Kenyatta said.
Planning Minister Wycliffe Oparanya on his part stated that the government plans to fast track the implementation of the public private sector partnership, to boost investment in development projects.