NAIROBI, Kenya, Apr 11 – The government will have to do more to facilitate the growth and participation of the private sector in the attainment of the Big Four development agenda.
The Kenya Economic Update report published by the World Bank outlines policy measures that will help the Government achieve the four priority areas of food security, affordable housing, boosting manufacturing and universal health coverage.
With little fiscal space to finance the resource-thirsty priority areas, the World Bank sees the public sector playing the important role of creating a conducive environment to catalyze private sector resources towards the achievement of the Big 4.
“Public sector resources devoted to the Big 4 would need to be contained within a fiscally sustainable resource envelope and should seek to reduce inefficiencies in spending in order to maximize impact,” the World Bank recommends.
The realization of the Big Four, the report states, will be underpinned by a stable macroeconomic environment which is necessary for the growth of the private sector.
The World Bank has reiterated the need for fiscal consolidation with a view of reducing the budget deficit, reforms in the mobilization of revenue, expenditure rationalization and improvements in debt management to boost the macroeconomic environment.
The desirable outcome from these improvements will be to, ‘re-ignite private-sector dynamism and to crowd in private investment to the Big 4.’
“Unshackling monetary policy, an important lever in the policy toolkit, by removing the interest rate cap should allow it (the private sector) to better respond to the slack in the economy,” the report states, adding that the removal of interest rates will need to be accompanied by a lower deficit, lower benchmarks, improvement of universal credit scoring among other measures.
The report also makes sector-specific recommendations that if implemented, will accelerate the realization of the big four agenda.
To boost food production and agricultural output, the WB recommends more investments in the productive areas of the sector like extension services, irrigation and research and development.
It also pushes for the removal of the “untargeted and regressive” fertilizer input subsidy program.
“Apart from being costly, it disproportionally benefits large and medium-sized farmers and crowds-out private investment in the purchase of fertilizers.”
Other recommendations in the health and manufacturing sectors include; subsidizing health insurance for the poor, exploring various health financing options and the development of special industrial parks and export processing zones.
The Bank projects the GDP will grow by 5.5 percent in 2018, which is within range of what the International Monetary Fund and analysts at StanChart have projected. By 2020, the GDP is projected to grow by 6.1 percent driven by domestic demand.