Kenya's economy should rebound in 2018 after drought and political turmoil during a prolonged election cycle cut nearly 1 per cent from this year's early economic growth forecast, Treasury CS Henry Rotich said on Tuesday.
The economy is expected to grow by more than 6 per cent next year, Rotich said.
He said growth would move towards 7 per cent in the medium term, without elaborating.
He had earlier trimmed the 2017 forecast to 5.0 per cent from a previous projection of 5.5 per cent, which itself was a reduction from 5.9 per cent.
The economy grew 5 per cent in the first half of the year, the government said, falling short of its full-year forecast.
"Agriculture this year will be better than last year, that is the reason why our growth looks optimistic, even at this time when we face these challenges on the investment side," Rotich told a news conference.
Rotich said that revenue collections for the first four months of the 2017/18 (July-June) fiscal year had fallen short by Sh40 billion.
Kenya's economy has faced a slowdown for most of the year. In addition to the drought and its political uncertainty, credit growth has slowed, partly because of a cap on commercial bank lending rates imposed last September.
Rotich said the government had no immediate plans to lift the cap, saying it was still studying its effects.
The government planned to forge ahead with its infrastructure plans, he said, including a port at Lamu to ease regional trade.
The government was also looking at issuing another Eurobond, Rotich said, although he would not give details. Kenya issued a $2 billion dollar-denominated Eurobond in 2014.
Rotich said a new Eurobond could be used to repay the outstanding amount of a $750 million syndicated loan that the government raised in 2015 and matured in October this year.
He said that 90 per cent of the investors in the loan had agreed to extend the maturity by six months until April 2018 while those 10 percent that did not want to extend have already been repaid.
"We have plans to extend it because we had the option of still refinancing it by a Eurobond but there were some which we extended, others we paid off ... and those we extend up to April, up to six months," said Rotich.
"We are prepared to refinance that over a much longer period of time."
The original $750 million loan was syndicated to a group of 26 banks and arranged by Citigroup, Standard Bank and Standard Chartered and pays a margin of 520 basis points over LIBOR.
Kenya held a presidential election on August 8, but the Supreme Court nullified President Uhuru Kenyatta's win and ordered a repeat election.
Opposition leader Raila Odinga boycotted the new election, on October 26, and Kenyatta won again, with 98 per cent of the vote, in a campaign marred by violent protests.
On Monday, a former lawmaker filed a petition at the Supreme Court challenging Kenyatta's second victory, in a last-minute move that opened the door to legal scrutiny of the vote.
"Kenya is a regional hub for trade, diplomacy and security. The prolonged election season disrupted its economy as investors waited to see the outcome," Rotich said.
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