November 19, 2021 - 5 minutes read

Kenya’s key economic strategies in 2022 Budget Policy Statement to spur recovery

By Amrit Labhuram

Kenya’s economy has been on a path to recovery in 2021 following the slump in 2021 occasioned by the negative effects of the Covid-19 pandemic. It is against this recovery background that Kenya’s 2022 Budget Policy Statement (BPS) is based upon. 

Kenya’s economy rebounded strongly in the second quarter of 2021, with real GDP growing 10.1% supported by the easing of Covid-19 containment measures. The rebound is supported by the continued reopening of service sectors, recovery in manufacturing, and stronger global demand. This is reflected in the robust performance of construction, manufacturing, education, real estate, and transport and storage sectors. 

The 2022 BPS outlines the policy measures that will continue to stimulate resilient and sustainable economic recovery in the short and medium terms. The policies are anchored on the Medium-Term Plan III of Vision 2030 and focuses on creating an enabling environment for businesses and industrial recovery, job creation, and safeguarding livelihoods. Further, the fiscal policy will focus on activities aimed at ensuring successful conduct of the 2022 General Election. As such, the FY 2022/23 budget is being prepared under a revised budget calendar that takes into account the preparations for the 2022 elections. 

To this end, the government will undertake the following targeted strategic interventions to support the realization of the “Big Four” Agenda and achieve a resilient and sustainable economic recovery: 

  1. Economic Stimulus Programme: The government will roll out a third financial stimulus programme that is designed to accelerate the pace of Kenya’s economic growth and to sustain the gains already made. The new Stimulus Programme will be targeting key productive and service sectors in 13 strategic interventions that cover: agriculture, health, education, drought response, policy, infrastructure, financial inclusion, energy, and environmental conservation.
  2. Harnessing the “Big Four” Agenda for Job Creation: The “Big Four” Agenda was initiated four years ago by the government as an economic blueprint meant to foster economic development and to provide a solution to the various socio-economic problems facing Kenyans. The 2022 BPS strives to stimulate job creation by pursuing “Big Four” projects such as supporting the growth of the manufacturing sector, achieving food and nutrition security, providing Universal Health Coverage, and providing affordable and decent housing to Kenyans.
  3. Maintaining a Conducive Business Environment for Employment Creation 
    1. Stable macroeconomic environment, in particular, maintaining the inflation rate within the policy target range of 2.5 to 7.5%, and sustaining fairly low and stable interest rates to support credit access by SMEs distressed by the pandemic.
    2. Deficit financing policy – The government will continue to diversify its funding sources and maintain presence in the international and domestic capital markets, and shall explore the use of green and climate change financing options.
    3. Business regulatory reforms, aimed at reducing cost of doing business in Kenya and encouraging private sector innovation and entrepreneurship for sustained economic recovery.
    4. Enhancing national security for sustained growth and employment – A safe and secure society provides an enabling environment for sustaining economic recovery. Government aims to implement reforms which include a police modernisation programme, training of security officers, and construction and upgrading of police stations.
  4. Infrastructure Development for Inclusive Growth
    1. Expansion of road network – the government targets to construct 6,107 kilometres of new roads, rehabilitate 385 kilometres and maintain 150,788 kilometres of roads over the next medium term.
    2. Rail, marine and air transport– the government shall prioritise maintenance of the Standard Gauge Railway (SGR) and Meter Gauge Railway. Budget allocations will be made to repair, expand and modernize aviation facilities to maintain their competitive edge in the region. Furthermore, the government shall continue to undertake massive investments in various ports and harbours across the country.
    3. Adequate, affordable and reliable energy supply – the government has sought to boost power generation from the current 3,024 MW to over 6,700 MW by end of FY 2024/25 with major sources being renewable geothermal, wind and coal.
    4. Promoting the use of ICT – the government will build on the progress made so far to improve ICT infrastructure and increase ICT skills and innovation in order to drive the attainment of government priorities. strategy will focus on expanding ICT infrastructure connectivity by further rolling out the National Optic Fibre Backbone (NOFBI) Broadband, management and improving cybersecurity, and enhancing ICT skills among the youth to enhance their employability.
  5. Sectoral Transformation for Broad Based Sustainable Economic Growth
    1. Environmental conservation and water supply – the government continues to prioritize sustainable exploitation, utilization, management and conservation of the environment as well as protection of water catchment areas.
    2. Stimulating tourism recovery, sports, culture and arts – the government continues to implement initiatives to support sports development, promote Kenya as the preferred tourism destination through Magical Kenya, preserve Kenya’s natural heritage and cultural identity, and nurture talents and arts.
    3. Sustainable management of land for social-economic development – the government has continued to scale-up investment towards policies and programmes covering land use, security of tenure, access to land title, transparent and secure land registration system. These efforts have increased the scope for enhanced food and nutrition security, growth in investments and industries, and increased household incomes from agriculture.
  6. Expand Access to Quality Social Services
    1. Quality and relevant education for all Kenyans – To improve education outcomes, the government will strengthen implementation of a number of reforms including development of critical education infrastructure, recruitment of additional teachers and scaling up curriculum development.
    2. Strengthening the Social Safety Nets – the government will continue to extend the cash transfers to the vulnerable groups and develop a financing plan for the Hunger Safety Net Programme.
    3. Empowering youth and women for employment creation – the government is implementing initiatives including “Kazi Mtaani” Programme to equip the youth with industry-relevant skills to ensure they are employable and productive post Covid-19 crisis, as well as provide them with income generating opportunities.
  7. Enhancing Service Delivery through Devolution – The National Treasury in collaboration with other stakeholders is in the process of implementing the National Policy to Support Enhancement of County Governments’ Own-Source Revenue (OSR). This is expected to address challenges around OSR collection and administration faced by the County Governments.
  8. Entrenching Structural Reforms to Facilitate Business and Employment Growth
    1. Strengthening governance and the fight against corruption – the government shall continue strengthening the selection, accountability and replacement of authorities, efficiency of institutions, regulations, and resource management. The Government shall also avail resources to the Independent Electoral and Boundaries Commission and other institutions to enable them manage the 2022 General Election in a free and fair manner.
    2. Deepening public financial management reforms – the government will continue to strengthen the institutional capacity of the public financial management (PFM) oversight agencies by reviewing legal and regulatory frameworks governing public procurement, promoting accountability in the use of public resources by conducting National and County audits, and expanding the use of e-Procurement platform to all Government operations.
    3. Fostering financial sector developments and reforms – To foster financial stability, the government through the Central Bank of Kenya will continue to monitor and regulate commercial banks and other appropriate financial institutions to ensure that unethical practices are tamed.
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