(Adds comments by IMF official)
By Duncan Miriri and George Obulutsa
NAIROBI, March 30 Kenya's Finance Minister Henry
Rotich said on Thursday he expected steady economic growth for
this year as he presented the country's last budget before a
national election in August.
Growth is expected to be 5.9 percent in 2017, the same rate
of expansion in the first three quarters of last year, he said.
"But growth could be lower if the ongoing drought persists
and the slowdown in private sector credit is not reversed,"
East Africa has been suffering from severe drought and aid
groups say 2.7 million Kenyans need food aid.
Rotich set the fiscal deficit at 524.6 billion shillings
($5.10 billion) or 6 percent of the gross domestic product, down
from 9 percent in the current fiscal year. He pledged to lower
it further to 4 percent of GDP in the 2019/20 fiscal year.
"The plans for fiscal consolidation are the most positive of
this budget," said Armando Morales, the IMF's resident
representative in Kenya.
He however cautioned that the minister's revenue projection
could be a little too optimistic. The minister projected a 13
percent increase in revenue.
"It will be difficult to grow the revenue but we need to go
through the details," Morales told Reuters.
Rotich has set aside billions of shillings for
infrastructure including railways and new roads, and increased
welfare payments for senior citizens.
"The net external financing will amount to 256 billion or
2.9 percent of GDP and will be mainly on concessional terms,"
Rotich told lawmakers.
The balance, 268.6 billion shillings or 3.1 percent of GDP,
will be borrowed from the local market, he said.
The government is investigating the effects of a
controversial cap on interest rates, which bankers say have
frozen smaller lenders out of the market as banks invest in
low-risk government bonds, the minister said.
After the government tightened banking regulations and
introduced the cap, the growth of private sector credit slowed
down to 4.5 percent last December, from 17 percent a year
earlier, stoking concerns about the potential impact on growth.
The government would freeze in-house recruitment except for
a few sectors, part of a promise to tackle the country's
ballooning wage bill, Rotich said in the budget.
President Uhuru Kenyatta, who is up for re-election in
August's parliamentary and presidential vote, has promised to
slash politicians' pay packages, which are among the highest in
He has also dismissed opposition criticism of government
borrowing, saying the money is funding an ambitious development
($1 = 102.8500 Kenyan shillings)
(Additional reporting by John Ndiso; Editing by Katharine
Houreld and Vin Shahrestani)