Treasury sees 10pc economic growth by 2017

The government projects the country’s economy to grow by 10 per cent or more by 2017.

The Cabinet Secretary for the National Treasury, Mr Henry Rotich, told an African international forum in Mombasa yesterday that Kenya’s economy was on the path of recovery despite hindrances from a global economic slump.

He said this in a speech read on his behalf by Central Bank of Kenya Governor Njuguna Ndung’u during the 2013 Annual Association of African Development Finance Institutions (AADFI), chief executive officers (CEOs) forum at Serena Beach Hotel and Spa.

Mr Rotich expressed optimism following steady recovery and growth of the country’s economy.

“Kenya’s economy has recovered steadily from 1.6 per cent in 2008 to 4.6 per cent in 2012.

We expect a growth of 5.6 per cent this year, rising to 7 per cent in the medium term and to double digits by the end of our 2nd Medium Term Plan in 2017,” he said.

He told the participants that radical reforms being implemented in Kenya’s financial sector have resulted in significant economic growth.

Any steady economic growth comes through sustained economic stability and sound fiscal and monetary policies and market oriented structural reforms, he said.

Kenya’s inflation has been contained and foreign reserves rose, resulting in a reduction of the public debt, he added.

Financial inclusion of the public has also been enhanced, leading to about 67 per cent of the population being able to access formal finance and, therefore, enabling them to participate in the economy, said Mr Rotich.

“The financial services sector has developed significantly in recent years, buoyed by financial innovation and sound regulation and supervision,” he noted.

The local economy, given its relative strength in Africa, has contributed much towards poverty reduction.

African economies should focus on reducing widespread poverty among citizens, he said.

“The government of Kenya expects a strong and vibrant manufacturing, ICT, energy and construction, among other sectors,” he said, adding that Kenya’s Development Finance Institutions (DFIs) are expected to contribute fully in these sectors.

However, he warned CEOs that more work needs to be done, saying DFIs faced greater challenges today.

The DFIs were successful during the first 20 years after independence because they enjoyed foreign exchange and price controls and a guaranteed monopoly in the market.

However, this is no more as they face stiff competitions from the private sector due to economic liberalisation, he said.

“Weak financial conditions have made it difficult for some DFIs to mobilise resources from the market or from development partners without guarantees from government,” he said.

Some of the DFIs cannot compete in the liberalised environment and cannot sustain themselves.

They have lost monopoly and failed to innovate as commercial banks and other non-banking institutions have emerged to compete with them.

Others face poor corporate governance and political interference, thus leaving their managements weak and the staff demoralised.

He urged the CEOs to make their respective DFIs catalysts of development by copying core principles and strategies that have been adopted successfully by other DFIs in Africa, Asia, Europe and elsewhere.

These strategies include sound commercial principles, governance, a wide range of financial products, and standards and guidelines.

The government of Kenya has adopted most of these, he said.