Economists urge Treasury to craft new stimulus package for faster economic growth

The Treasury should craft a new fiscal stimulus package to boost the slowing economy as concern grows over risks from this year’s General Election and the protectionist policies of US President Donald Trump, economists say.Kenya last turned to a stimulus programme to kick start the economy in 2009 when the country was still recovering from the 2007-08 post-election violence, drought and the global economic crisis.


The economy is projected to slow down this year, while the operating environment for corporates has also become tougher, with multiple companies announcing lay-offs and profit warnings in the past one year.

“In considering the balance of evidence, we are calling for an urgent economic stimulus package that will involve targeted government interventions that will boost domestic demand in key economic hubs around the country,” said Ken Gichinga, chief economist at Mentoria Consulting.

Key sectors

“The government, as the largest player in the economy, has the capacity to spur cash-flow in key sectors of the economy which have essentially stagnated.”


A stimulus package usually works by injecting government funds directly into key economic sectors with the aim of boosting employment and spending. In the 2009/2010 fiscal year, the government plan was to inject up to Sh22 billion directly into the economy, through construction of health centres, agriculture produce markets, fishponds and polytechnics.


The Central Bank of Kenya has projected that the economy will grow by 5.7 per cent this year, slowing down from 5.9 per cent in 2016. Other bodies such as the IMF and World Bank have also projected a sub-six per cent growth rate for the year.


Treasury secretary Henry Rotich has however painted a rosier picture of the economy, banking on accelerated public investment to generate higher tax revenue that would buttress the economy.


The Treasury is therefore unlikely to be rushed into putting in place an explicit stimulus programme.

Mr Rotich said last month that challenges in adapting to the recently changed VAT and excise law would be addressed soon, adding that administrative issues and leakages in KRA’s customs section have been addressed.