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Kenya

Headline figures mask pain at the grassroots

The treasury holds down the deficit and rakes in cash as tax reforms boost revenues by a third

On paper, Kenya's economy is roaring. The World Bank says the economy has bounced back strongly from the Covid-19 shock. Output for the first half of this year was above pre-pandemic levels; GDP is expected to grow by 5%, one of the faster recoveries in Africa (AC Vol 62 No 13, Banking on a fast recovery).

'Kenya's economy has shown considerable resilience to the enormous shock of the pandemic, and this year is expected to post one of the stronger growth rebounds in the region thanks to diversified sources of growth and sound economic policies and management,' said Keith Hansen, World Bank Country Director for Kenya.

These include trying to hold down the budget deficit forecast to average 8.2% in fiscal 2022. Since devaluation in 2013, Kenya's budget deficit has averaged 7%.

For the treasury, the strongest positive is the nearly 30% increase in tax revenues this year, thanks to a reform of the revenue system, completed just before the pandemic struck.

The International Monetary Fund has also given Ukur Yatani's Treasury a clean bill of health, stating on 18 December that it would immediately disburse another $258.1 million of budget support, taking it to a total of $972.6 million from a pot of up to $2.4 billion (AC Dispatches, 24/08/21, The bills keep piling up).

IMF Deputy Director Antoinette Sayeh said that Kenya's Treasury was 'firmly committed to their economic programme in a challenging environment', adding that 'programme performance has been robust' and had met its targets.

These headline figures are somewhat removed from realities on the ground. Many Kenyans have been impoverished by the fall-out from the pandemic. Slumping demand for Kenya's exports and national lockdowns have cost tens of thousands of jobs.

That helps explain why Uhuru Kenyatta's government has ruled out new restrictions despite a sharp recent increase in Covid cases. Many of the latest cases are thought to be of the Omicron variant.

As of 6 December, about 10% of adults in Kenya (2.9 million people) had been fully vaccinated while another 16% (4.9 million people) had received their first dose.

Other trends may help balance the books. A surge in domestic tourism has replaced some of the losses from long haul foreign tourists. Packed hotels and beaches in Mombasa and Malindi in this holiday season suggest that middle class Kenyans have maintained high levels of disposable income. 

The combination of lost income and increased home-working prompted by the pandemic have triggered a flight of middle class Nairobians from the capital. That would be a positive if it helps close the wealth gap between Nairobi and the rest of the country.



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