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The surging information and telecommunication sector will spur Kenya’s economic growth this year, according to the World Bank

The growth will take place even with the imminent challenges of elections and establishment of a new system of governance, the WB report said. This comes in the wake of reduced economic growth of 5.3 per cent of Gross Domestic Product (GDP) in 2012, down from the 5.7 per cent projected last year.

"The continued economic crisis in the EU and the US, which are significant markets for Kenya's exports, will slow down economic growth in Kenya," said Justus Nyamunga, Director of Economic Affairs in the Ministry of Finance, during the launch of the public sector hearing of the 2012/13 Medium Term Expenditure Framework. According to data from the ministry of finance, over the last nine months of 2011, the Kenyan economy grew by 4.2 per cent down from 4.9 per cent during the corresponding period of 2010.

"This lower projection is not unique to Kenya as many countries including fast growing economies in the East African region including Rwanda and Tanzania have done the same," the ministry official said.

Following the launch of the latest Kenya Economic update, a WB report says that despite facing the challenges in 2012, growth in information and telecommunications could boost the performance of a number of sectors, including transportation, agriculture and infrastructure.

“Africa is on a growth path, but Kenya, particularly, has two advantages,” said Wolfgang Fengler, the World Bank’s lead economist for the East African region. “Human resources and great location.”

On its part, the International Monetary Fund has said that it expects the Kenyan economy to grow 5.3 per cent in the 2011/12 fiscal year before accelerating to expand 5.8 per cent in 2012/13. Kenya's budget review and outlook paper for the 2012/13 financial year is projecting total revenue of US$10.6bn against expenditures of US$13.19bn.

"Treasury hopes to fund part of the deficit by borrowing a total US$2bn, about 4.6 per cent of the GDP with external funding accounting for US$1.15bn," said Nyamunga.

With rising inflation, reduced trade with European partners and the ongoing war with Al-Shabaab fighters in Somalia, Kenya’s economy is heading for an unsettled year, according to analysts, though, as past resilience has shown, it is expected to weather the storm. The roll-out of a new administrative structure brought about by the new constitution is also expected to put pressure on finances. Increased salary demands from public servants and the need to service increased external debt are some of the issues the government has also to grapple with.

Officials in the Finance Ministry report that high inflation and a volatile exchange rate slowed down domestic borrowing from the projected one billion dollars by December 2011 as the government only managed to collect US$161mn locally. Kenya is looking to borrow US$119.5bn in total domestically in 2011/12.

The Kenya Revenue Authority has already decried the 17 per cent drop in revenue collected by December 2011. The treasury is optimistic that the economy will remain resilient with most expansion coming from growth in agriculture, tourism and exports especially in the East African region. The treasury expects to seal a deal for a US$600mn short-term external loan early in the year to help plug its budget deficit this fiscal year after it shelved plans to issue a Eurobond.

Mwangi Mumero

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