Kenya says plans to cut frivolous spending won’t harm growth

Kenya’s planned budget cuts in the current fiscal year will not affect the nation’s “still strong” economic growth that’s being buoyed by the construction and agricultural sectors and recovery in tourism, Treasury Secretary Henry Rotich said in an interview.

The finance ministry in East Africa’s biggest economy may trim spending for the year ending June 30 by 4.5 percent to 1.91 trillion shillings ($18.7 billion) in a supplementary budget to be presented to lawmakers later this month, according to a draft policy statement on its website.

“It’s not necessarily always that a bigger budget means bigger growth in the economy,” Rotich said Thursday in Nairobi, the capital. “It depends on what you are spending on. The expenditure that we are touching is not expenditure that is going to hit on our growth.”

The 4.5 percent cut “was just an indication, the figure may be less than that or around there, but the direction will be to reduce.”

Recovering Economy

President Uhuru Kenyatta’s government will “reprioritize and rationalize” expenditure on new projects that are yet to begin as it battles to rein in spending and to curb domestic borrowing. “Only new projects that have not started off, or have started off but absorption is slow” will have funds frozen.

The government will clamp down on unnecessary government travel, frivolous expenses and may recall money that had been earmarked to deal with any adverse effects of the El Nino weather event, Rotich said. The world’s biggest exporter of black tea had expected the phenomenon would cause heavy flooding.

Growth is set to recover this year to 6 percent from an estimated 5.6 percent in 2015, according to the Treasury’s forecasts. The rate of expansion sputtered following a drought that cut tea output and Islamist attacks hurt the tourism sector, two main sources of foreign exchange and employment.

Spending on a Chinese-built $3.8 billion railway would continue boosting demand in the construction sector, Rotich said.

“The sectors that were doing poorly one or two years ago are now doing better, our growth is still strong,” he said.

 – Bloomberg