Britam Assets Managers (BAM) have told the government to prioritise private sector growth over donor funded development projects.
Chief executive Mr Kenneth Kaniu told a media briefing at a Nairobi hotel that the government must urgently look into ways of reducing interest rates so as to spur private sector participation in the development agenda.
Mr Kaniu observed that while the debt to GDP ratio stood at 52 per cent, the current trend in government borrowings to fund infrastructural growth portends a grave risk that could see Kenya live beyond its means.
“Foreign loans have proved expensive and this has seen the government engage in domestic borrowing on more commercial terms which has also caused interest rates to rise beyond the reach of private sector players,” he said.
BAM warned that increased foreign borrowing from 23.5 per cent of the GDP to last year’s 28.5per cent left Kenya badly exposed to external shocks associated with global interest and currency volatility.
“We need to rope in the small and medium sector players into the tax bracket as opposed to burdening Kenyans with more taxes. County governments also need to utilise public funds extremely well so as to uplift livelihoods within their regions,” he said.
Saying Kenya’s 2016 portends a positive growth of 5.8 per cent, Mr Kaniu welcomed the planned reduction of government spending saying it would help release more funds for the development budget from internal sources.
“A strengthening shilling, stable inflation rate of 6 per cent, food and interest rates is critical to maintaining gradual and sustainable economic growth moving Kenya towards an upper middle income status,” said Mr Kaniu.
The report dubbed, ‘Fiscal Consolidation’ said that while heavy borrowing to fund infrastructural growth in the past five years was commendable, the time had come for the government to slam on the brakes on donor funded development in favour of private-public partnerships.
“The sluggish economic growth, supply side shocks are the main risks for 2016 and that is why we are urging the government to consolidate its gains by sourcing for more revenue from new sources without increasing taxes on key goods.