Kenya: Kenyatta faces economic storm clouds in second term

Winning a second disputed election may have been the easy part for Kenyan President Uhuru Kenyatta.

Now he needs to tackle daunting economic challenges ranging from slackening growth and runaway government spending to an unemployment rate that tops 40 percent.

Kenyatta resoundingly won an Aug. 8 rematch of a 2013 contest against former Prime Minister Raila Odinga, who alleged he was cheated of victory.

Opposition protests largely fizzled out over the weekend after a security crackdown and Odinga’s five-party coalition is still deciding whether they will challenge the results in court.

East Africa’s largest economy boomed during most of Kenyatta’s first term, expanding an average of 5.7 percent a year as it benefited from new road and rail links and lower fuel costs.

Now a drought and slowing bank lending are taking their toll on growth and tax revenue, making it harder for the government to service the loans it took out to finance the new infrastructure and simultaneously meet a pledge to uplift the half of the population of 47 million who survive on less than $2 a day

“The immediate priority for the government will be to do more to support growth in the near-term, while still setting out a meaningful fiscal consolidation path,” said Razia Khan, chief Africa economist at Standard Chartered Plc, in London.

“The debt is sustainable, so long as there is growth. Weaker trend growth can very easily push the public debt to less sustainable levels.”

Slowing Growth

The government forecasts gross domestic growth at 5.5 percent this year, down from 5.7 percent in 2016. The expansion rate eased to a three-year low of 4.7 percent in the first quarter.

The ratio of public debt has burgeoned to about 54 percent of GDP, from less than 40 percent eight years ago, while the budget deficit exceeds 10 percent of GDP.

Kenya’s economic expansion may come under further pressure because large parts of the economy ground to a halt during the election, which was marred by violence.

The opposition said more than 100 people were killed by the security forces, while the Kenya National Commission on Human Rights put the death toll at 24. The police denied both claims.