• Parliamentary Budget Office wants MPs to ring-fence resources allocated to key programmes and projects in the agriculture sector that will lead to higher yield.
• The team that advises parliament on budget and the economy is projecting that growth in private investment could remain muted.
Image: FILE
Budget experts in Parliament have warned that the upcoming elections will disrupt the economy unless the government takes steps to avert the fall.
The Parliamentary Budget Office said this, coupled with depressed rainfall, may dampen the National Treasury’s hopes of turning the economy around.
The team that advises Parliament on budget and the economy is projecting that growth in private investment could remain muted.
PBO says investors are most likely to adopt a wait and see attitude pending the outcome of the general election.
“A tension-filled election marred with violence could lead to investor flight,” the team said in its budget watch for the financial year 2022-23.
During the State of the Nation address on November 30, President Uhuru Kenyatta revealed that Kenya lost billions as a result of poll jitters.
“In the 2017 general election, the economy lost close to Sh1 trillion in response to the nullification of the presidential election,” the President said.
He said this translated into about Sh1 billion every working hour for the 123 days of electoral competition.
In 2007, the President said, the country lost Sh250 billion in economic growth in a matter of days.
The PBO says the situation would be no different from the past unless the government puts measures to cushion businesses.
The Phyllis Makau-led team says the gloomy situation may be worsened by poor weather outlook that stands to dampen agricultural performance.
“The weather is likely to be a significant drag on growth. The food security outlook has been worsening on account of two consecutive poor rainfall seasons as well as pests and diseases,” the experts said.
PBO says with forecasts showing rainfall would remain depressed for a better part of the year, the food outlook for 2022 may be worse.
“Agricultural performance may improve but this will be moderated by fear of violence (or violence) which may disrupt agricultural activity,” the experts said.
“The tendency of increased crime during election periods may affect the transportation of agricultural produce.”
They said beyond the weather outlook, there is no significant change expected in agricultural policy or investments.
“Therefore, this performance is likely to remain unremarkable for the foreseeable future,” the economists said.
Treasury forecast the country’s real GDP growth to expand by 4.5 per cent in 2022, 5.1 per cent in 2023 and 5.7 per cent in 2024.
PBO says a short relief may come through increased private consumption, argued to be a significant contributor to growth.
It cites the campaign-related spending, being resources spent on campaign materials including printing of T-shirts, banners, posters, fliers, pamphlets as well as gifts.
“These are likely to increase money in circulation thereby increasing consumer activity,” the experts said.
“The stockpiling of food and essentials by wananchi on account of electoral uncertainty could lead to a spike in consumer demand just before the elections.”
PBO projects that there would be increased travel as many return to their rural homes.
“This could also result in higher performance of the transport and storage sector,” the team said.
They said by 2023, the growth in private consumption will have normalised to previous trend levels.
The experts say government consumption would increase significantly in 2022 on account of election-related spending and drought mitigation measures.
However, the increased expenditure demands are projected to exert significant pressure on the budget.
PBO advises that the government intervene in terms of investments in agriculture, manufacturing, and exports.
“Any interventions expected to enhance economic performance should focus primarily on these key sectors,” they said.
PBO says last year, the industries accounted for the highest wage employment in the private sector.
Of these, manufacturing contributed 15.8 per cent, whereas agriculture forestry and fishing contributed 15.1 per cent, whereas wholesale and retail contributed 13.5 per cent.
“If adequately supported, the expected returns are high in terms of increased household employment and income which will boost consumer demand,” the team said.
PBO projected that if its policy proposal is adopted, the country may yield a GDP growth of 4.5 per cent in 2022, 5.5 per cent in 2023, and 6.3 per cent in 2024.
They said if the proposed investments are efficiently implemented, they stand to boost export competitiveness.
PBO vouched for value addition to exported agro products and, or increase in quality of manufactured goods that can be exported to both existing and new export markets.
Edited by Kiilu Damaris