Quarterly Economic and Budgetary Review: Analysis of 3rd Quarter FY2022/2023 (Ending March 31, 2023)

  • 22 May 2023
  • 5 Mins Read
  • 〜 by Naisiae Simiren

The National Treasury recently published the Third Quarter report for the financial year 2022/2023 per the provisions of the Public Finance Management Act, 2015. Below are some of the highlights of the Report. 


Economic Growth


The report reveals that economic growth witnessed in 2021 post-Covid-19 was sustained however, there was a slight decrease in the growth rate. The Real GDP in 2022 was at 4.8% against 7.6% recorded in 2021. The contraction has been attributed to factors such as; the effects of the Covid-19 pandemic, supply chain disruption following the Russia-Ukraine invasion, and the effect of the invasion on global commodity prices and drought due to drastic climate change. 


The growth in 2022 was spread across all sectors of the economy but was more pronounced in service-based activities. Key economic GDP contributors such as agriculture contracted by 1.6% as a result of the harsh weather conditions that affected agricultural production leading to the high cost of produce such as maize, potatoes and vegetables. Other than the declined agricultural production, livestock production was also severely affected. Fortunately, the sub-sector’s performance was cushioned by the improved production of fruits, coffee, and sugar cane. Sub-sectors such as information and communication and financial and insurance activities posted accelerated growth compared to other sub-sectors such as health, education and real estate. The increase in growth in ICT, financial and insurance sub-sectors was mostly credited to an increase in mobile money transfers and improved activities in the financial service despite a slowdown in growth in insurance services.


The manufacturing sub-sector grew at 2.7% in 2022 compared to 7.3% in 2021. The decelerated growth in agriculture affected the input of agro-processing in the manufacturing sub-sector. The electricity and water supply sub-sector grew by 4.9% in 2022 compared to the 5.6% growth registered in 2021. The growth in the sub-sector was supported by increased generation of electricity from renewable sources such as geothermal and wind. 




True to the words of economist Milton Friedman, ‘inflation is always and everywhere a monetary phenomenon’. The quarterly report revealed that the inflation rate increased to 9.2% in March 2023 from 5.6% in March 2022 as a result of higher food prices attributed to supply chain disruptions and adverse weather conditions and higher fuel prices largely due to the removal of fuel subsidy and increase in electricity prices due to higher tariffs. 

The report indicates that the inflation rate was experienced across most Sub-Saharan African (SSA) economies attributed to similar factors such as unfavourable weather conditions, Russia- Ukraine invasion and Covid-19-related supply chain disruptions. These factors led to increased transportation costs which as a result led to an increase in the cost of products. In comparison, Kenya’s inflation rate at 9.2% in March 2023 was much lower than that of the majority countries in the SSA for instance Ghana and Ethiopia which had a double-digit inflation rate at 45% and 34% respectively.

Money and Credit 


As earlier mentioned, financial subsectors recorded growth during the period in review. Broad money supply grew by 10.6% in the year to March 2023, the growth was as a result of an increase in domestic credit. However, there was a reduction in Net Foreign Assets (NFA) as official reserves at the Central Bank declined due to debt servicing and an increase in borrowing by commercial banks from foreign sources. On the other hand, Net Domestic Assets registered an increase in growth of 14.9% in the year to March 2023

Net Domestic Assets (NDA) registered a growth of 14.9% in the year to March 2023. The growth in NDA was mainly supported by an increase in credit to the private sector as business activities improved whereas domestic credit extended by the banking system to the Government declined to a growth of 17.1% in the year to March 2023.


Foreign Exchange Reserves


The official reserves held by the Central Bank in March 2023 represented 3.9 months of import cover as compared to the 5 months of import cover in March 2022. The required import cover is a minimum of 4 months to provide an adequate buffer against short-term shocks in the foreign exchange market. Nonetheless, the foreign exchange rates of the Kenya shilling to the US dollar and other currencies continued to decline.  The US dollar exchange rate to Kenya shilling rose to KSh 129.7 in March 2023 compared to KSh 114.3 in March 2022. Against the Euro, the Kenya shilling weakened to exchange at KSh 138.8 in March 2023 compared to KSh 126.2 in March 2022 while against the Sterling Pound, the Kenyan shilling also weakened to exchange at KSh 157.4 compared to KSh 151.0 in March 2022.

In comparison to other countries in the SSA, the Kenya shilling’s performance to the exchange rates was relatively low. This report attributed to stable foreign reserves, an increase in export receipts and remittances. 




Total revenue collected by end of March 2023 including Appropriation-in-Aid amounted to KSh. 1,686 billion against a target of KSh. 1,773.4 billion, nonetheless, this was a decline in growth of 10.9% compared to a growth of 22.1% recorded in March 2022. Ordinary revenue collection was KSh. 1,441.2 billion against a target of KSh. 1,553.3 billion, KSh. 112.1 billion below the target. All ordinary revenue categories recorded below-target performance during the period under review except import declaration fees which overperformed by KSh. 1.1 billion while traffic and other revenue were on target. In the event, the Finance Bill is approved by Parliament, Import Declaration Fee is likely to sustain the stellar performance as various products have IDF introduced to promote local industry. 



The total expenditure for the period under review amounted to KSh. 2,209.2 billion, against a target of KSh. 2,340 billion. The below target expenditure was recorded in development expenditures (including A-I-A) by the National Government and County Government transfers while recurrent expenditures were above target during the period mainly associated with targeted operations and maintenance expenditures, and wages and salaries. 


Public Debt

The gross public debt as at 31st March, 2023 increased by KSh. 988.8 billion to KSh. 9,390.7 billion compared to KSh 8,401.9 billion as at the end of March 2022. The gross public debt comprised of 51.7% external debt and 48.3% domestic debt. The increase in public debt is attributed to external loan disbursements; exchange rate fluctuations; and the uptake of domestic debt during the period. During the period under review, the cumulative debt service payments to external creditors amounted to KSh. 312.6 billion which comprised of KSh. 196.9 billion (63%) principal and KSh. 115.7 billion (37%) interest. 


Subsectors such as agriculture, forestry and fishing are bound to improve in this coming quarter following the abundant rainfall. This will have a positive impact on agro-processing which is a main input in the manufacturing sector. Information, communication and technology, financials and insurance activities are also likely to sustain the growth with proposals in the Finance Bill 2023 favouring the growth of these sub-sectors. However, debt serving and the weakening of the Kenya shillings continues to be a major hurdle in economic growth. Nonetheless, revenue collected will also likely increase if the Finance Bill is approved by the National Assembly as several taxes have been either increased or introduced.