Analysts: Treasury should craft Ksh 35B stimulus package

By O’Brien Kimani

Treasury should craft a 35 billion shillings economic stimulus package to end the ongoing economic stagnation.

Analysts at Mentoria consulting say the most affected sector is the financial sector where hundreds of jobs have been lost and credit growth has shrunk to levels seen in 2008.

The analysts have welcomed renewed efforts to lure manufacturers into the country citing carmakers Volkswagen and Peugeot as a pointer to improving investment climate.

It has been five months of bloodbath in Kenya’s financial sector following the enactment of an interest rate capping law in October.

The law that caps interest rates at a maximum of 14 percent has seen the sector layoff close to 1,000 people in a bid to remain afloat.

Credit growth has further dropped to levels last seen in 2008 when the country plunged into violence following the 2007 disputed presidential election.

A report by Mentoria Consulting says the drop in private sector credit growth from 19.5 per cent to an estimated 4.8 per cent year-on-year in 2016 will undermine economic activities especially in the services sector which has been a key economic driver in the past.

Gichinga says treasury will be forced to craft an economic stimulus worth 32 billion shillings to aid the services sector to realize growth.

The report has further painted a bleak future of the Kenyan economy due to slowing regional economic growth especially in Uganda, Rwanda and South Sudan which are Kenya’s largest export markets.

Mentoria lauded efforts by the government to lure manufacturers into the country citing the re-entry of German and French car makers Volkswagen and Peugeot.

Two more companies GZI and Wrigley’s have announced intentions to invest 10 and 6 billion shillings in the manufacturing sector respectively.