Kenya should spend more to sustain growth - Britam

The Kenyan government is being urged to ramp up its expenditure by 16.4 percent this year in order to achieve the targeted 5 percent growth. A report by Britam Asset Managers highlights the need for increased investment in infrastructure development to ensure future interest payments can be met, especially as the current debt stands at 25.6 percent of the GDP and the country has seen a 6.7 percent growth over the past six years. Kenneth Canyou, the Chief Executive Officer of Britam Asset Managers, emphasized the importance of government spending as a catalyst for economic growth during a recent interview with CNBC Africa. Can you indicated that private sector credit growth has significantly slowed, dropping to 5 percent from 18 percent just 12 months ago. With banks lending less to both the private sector and households, private consumption has taken a hit. Canyou argued that the government's continued investment in infrastructure, such as roads, bridges, and railway projects, is crucial to driving job creation and stimulating economic activity. This push for government spending aims to offset the weak growth in the private sector and consumption. The report by Britam Asset Managers also warned about external factors such as inflation and drought affecting Kenya's economy. Canyou pointed out that suboptimal rainfall in the first quarter of the year could lead to higher food prices and inflation. Furthermore, the depreciation of the Kenyan shilling against the US dollar may result in imported inflation, particularly impacting the country's oil import bill. With a substantial amount of foreign debt to service, any weakening of the shilling's exchange rate could escalate the cost of debt repayments, adding pressure on the economy. Amid these challenges, Canyou discussed the recent precautionary loan of $1.5 billion from the International Monetary Fund (IMF) to Kenya. While the loan provides a sense of stability, Canyou highlighted that no central bank can entirely shield a currency from volatility. The IMF facility, while positive, may not be sufficient to mitigate all the risks facing the Kenyan economy, especially considering global economic uncertainties linked to policies from leaders like President Trump in the US and the repercussions of Brexit. In conclusion, Canyou stressed the importance of strategic government expenditure in driving Kenya's economic growth trajectory. By directing funds towards infrastructure development and key sectors, the government can stimulate economic activity, create job opportunities, and offset the challenges posed by a sluggish private sector and external economic pressures.