World Economy

World Bank Tells Kenya to Invest More in Private Sector

The private sector is being starved of credit with more lending going to the public sector.The private sector is being starved of credit with more lending going to the public sector.

Kenya’s economic growth will reach 5.5% in 2018 and rise further to 5.9% in 2019, the World Bank announced on Thursday in Nairobi.

World Bank country director for Kenya Diarietou Gaye said the country could even perform better if it addresses some of the challenges currently slowing growth, Xinhua reported.

“One of the key issues that Kenya needs to address is the high wage bill of the public service. Kenya also needs to improve efficiency in public investments so that the people can get full value of such projects,” said Gaye during the launch of the 16th edition of the Kenya Economic Update.

The East African nation’s gross domestic product growth is estimated to drop to 4.9% in 2017, a 0.6 percentage point dip from the earlier forecast of 5.5% growth.

The World Bank largely attributed Kenya’s slowdown in economic momentum to drought that hindered national agricultural output and the generation of hydropower which together increased inflation and reduced household consumption.

“We believe Kenya’s economy can rebound and strengthen through specific measures that safeguard macroeconomic stability, enable the recovery of private sector credit growth, and mitigate the impact of future adverse weather conditions on the agriculture sector,” she added.

Gaye said Kenya will also need to improve its revenue collection and review the capping of the interest rates which he said has denied credit to the private sector.

“The private sector is being starved of credit with more lending going to the public sector. Ideally for me, I would want to see an economy which is more driven by the private sector rather than by the activities of the public sector,” said Gaye.

“While the removal of the interest rate cap would be a step toward this, it will not be enough on its own,” the bank said.

Hardest hit by low lending to the private sector has been the manufacturing sector, which threatens to slow down Kenya’s 10-year industrialization blueprint, the ‘Kenya’s Industrial Transformation Program (2015-2025)’, to create 435,000 additional jobs and $2-3 billion to Kenya’s gross domestic product.

“The last four years have been about laying the foundation for creating a competitive manufacturing base both on infrastructure and on the cost front as well as on improving business environment. The time is now to put manufacturing at the center stage of Kenya’s economic future,” said Kenya’s Minister for Industry, Trade and Cooperatives Adan Mohamed.

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