COVID-19 slashed nearly 9pc of Kenya’s GDP – IPF

NAIROBI, Kenya Jan 11- Kenya lost about 9 percent of its Gross Domestic Product (GDP) due to the COVID-19 pandemic, an analysis by the Institute for Public Finance (IPF) Kenya has revealed noting that it has fallen below the pre-crisis forecast by 2023. 

The Institute’s Head of Research, John Nyangi attributed the downturn to the unsustainable management of Kenya’s public finances which made the country vulnerable to shocks.

“This stopped the government from mounting a very significant stimulus in 2019/20, and now leaves it with a pressing need for fiscal consolidation going forward,” the report noted.

Accordingly, IPF noted that with Kenya’s massively downgraded  debt carrying capacity, the country remains at high risk of debt distress and as a result, fiscal space will be highly constrained for several years.

The report projected that country’s fiscal deficit will fall back to 4.5 per cent by 2023/24, from highs of over 8 per cent of GDP in 2020/21.

Even so, IPF noted that the government’s new National Tax Policy Framework set for release in 2021/22 could aid to outline new measures to boost revenue performance and review the exemptions and exclusions that have plagued Kenya’s performance for many years.

“The public finance management system in Kenya still faces some critical weaknesses but the national government has continued to make efforts to strengthen budget transparency,” said James Muraguri, the founder and CEO at the Institute of Public Finance.

The estimated 2019/20 and 2020/21 fiscal deficits of 8 per cent of GDP are expected to push debt to over 70 per cent of GDP by the end of 2021/22, with Kenya continuing to be assessed as being at high risk of debt distress by the IMF.