Costly loans brings down GDP growth to 4.7 pc

EconomyThe Treasury has estimated that Kenya’s economic growth rose slightly to 4.7 per cent from 4.4 per cent in 2011, which is below the official projection of 5.1 per cent.

Economic Secretary Geoffrey Mwau said on Wednesday, revealing the figure which was yet to be announced officially, that the GDP growth, aided by adequate rainfall, was likely to improve this year to at least 6 per cent.

The first half of 2012 was marked by high lending and inflation rates that restricted investment.

Mr Mwau said that the Treasury expected a fairly manageable transition to the next administration once the General Election is over next month.

He told a symposium called by the Institute of Certified Public Accountants of Kenya (ICPAK) that the higher growth projection is based on steady inflows of foreign direct investments, rainfall, continued reforms in the use of public funds, and macro-economic stability.

Both the World Bank and the International Monetary Fund have predicted a 6 per cent GDP growth for Kenya in 2013, but emphasised that this could be brought down to 5 per cent under less favourable economic and political conditions.

Mr. Mwau added that the East African region, which was their main market, was becoming resource rich. This was changing the dynamics of growth and they expected more flows in the form of foreign direct investments.

Low inflation, falling interest rates, and a stable exchange rate of the shilling were encouraging higher growth.

Mr. Mwau said that the great interest in the region had attracted mineral exploration and that was likely to continue bringing in FDI. Kenya was ranked second in sub-Saharan Africa last year in terms of attracting FDI and they had inflows due to investments in geothermal generation, oil, and mineral exploration.

He revealed this while he was speaking at the ICPAK symposium called to discuss realisation of devolution in Nairobi.

But, other speakers at the forum expressed fear that a high public wage bill would continue to hamper the economic growth. They said that the large wage bill placed constraints on the implementation of the development Budget as well as flagship projects under Vision 2030.

Nicodemus Odongo, director of research, compliance, policy and planning at the Salaries and Remuneration Commission said that the public wage will had gone completely out of hand and needed to be checked because it threatened economic growth as half of the revenue was going into payment of salaries and wages.

While making a presentation, Mr Odongo showed Kenya’s public wage bill was 12.1 per cent of GDP as against the best practice of 6.5 to seven per cent.

Consequently, the wage bill stood at KSh. 457 billion, which was 27 per cent higher than two years ago after a series of payment increases to civil servants, teachers, doctors, and lecturers.

Mr. Odongo said they were reviewing the salaries and allowances of state officers and the public had indicated that the payments were too high, and they would be having a final say in the matter soon. Mr. Odongo said that the concern was not so much against the actual basic salaries, but the allowances.

The Commissioner for Implementation of the Constitution, Charles Nyachae, advised politicians against being too optimistic about the ability to deliver at the county level. He told the symposium that one major challenge that devolution will face are public expectations and devolution will not take place overnight and it cannot happen that easily.

Image courtesy: FreeDigitalPhotos.net

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