The US is likely to cut a multibillion-shilling annual aid to Kenya under the Donald Trump presidency, a new report suggested yesterday.
The Economic Insight: Africa Q4 2016 report, commissioned by the Institute of Chartered Accountants in England and Wales, says there are signs of the Trump's administration adopting an expansionary fiscal policy. This, coupled with spending cuts to accommodate increased budget for infrastructure development, is likely to cut off official aid streams to Africa, the accountancy and finance body warns.
The analytical report – produced by macroeconomic and industrial development forecaster Oxford Economics – focused on Kenya, Tanzania, Ethiopia, Nigeria, Ghana, Ivory Coast, South Africa and Angola.
“A Trump presidency raises the risk of the world’s largest economy reining in development aid thus affecting dependent countries such as Ethiopia, Kenya, Tanzania, Nigeria and DRC,” ICAEW said in a press statement.
The US is Africa's largest bilateral official aid benefactor with an inflow of about $9 billion (about Sh918.90 billion), followed by the UK ($4 billion or Sh408.40 billion) and France ($2 billion or about Sh204.20 billion), the estimates by the Organisation for Economic Co-operation and Development for 2015 shows.
Official development aid receipts into East Africa were largest in Ethiopia at $3.5 billion (about Sh357.35 billion), followed by Kenya at $2.5 billion (Sh255.25 billion). Official aid to Tanzania and Uganda was estimated at $1.5 billion (Sh153.15 billion) each.
“Aid is one of the main channels through which a change in US policy under the new president could impact Africa,” ICAEW regional director for Middle East, Africa and South Asia Michael Armstrongsaid in the statement. “Policymakers and businesses across the continent will be keen to see President-elect Trump’s plans for development policies once he takes office (from January 20).”
Taxation revenues are, however, the main financier of the Kenya government's annual budget. For this financial year's Sh2.02 trillion budget, for example, 65.84 per cent (or Sh1.33 trillion) is expected to be funded by the taxpayers, estimates by the National Treasury indicates. Loans and grants from foreign governments and international organisations are this year estimated at Sh67.27 billion – comprised of Sh50.45 billion in projected loans and Sh16.82 billion in grants.
In the four months to October, the Treasury received Sh11.88 billion in foreign loans and Sh1.31 billion in grants, the statement of Actual Revenues and Net Exchequer Issues shows.
The Trump's administration could also affect trade relations with Africa through Africa Growth and Opportunity Act framework, analysts at ICAEW say. Trade volumes between the US and Africa have been dwindling, hurt by shale boom which cut the need for crude oil.
“Trade is another channel likely to be affected by the new US administration,” Armstrong said. “Considering the president-elect’s protectionist stance, African economies could be harmed by tighter policies towards agricultural and manufacturing trade.”