The National Treasury of Kenya is buoyant with sustained economic growth this year, but warns that the outlook could be dampened by rising external shocks that include the Russia-Ukraine conflict and U.S. interest rate hikes.
The Treasury said while it expects the economy to grow 6.1 percent in 2023 and maintain that momentum over the medium-term, global uncertainties could impact growth.
“There is the possible worsening of the Russia-Ukraine conflict, which heightens the risk of oil and commodity price volatility, elevated inflationary pressures and the lingering effects of the COVID-19 pandemic,” it said in a proposed Budget Policy Statement for 2023 issued on Thursday.
It added that tightening the global monetary policy, especially in the United States, could increase volatility in the financial markets, hurting the local currency.
For the first time in five years, Kenya’s inflation rate, which stood at 9.1 percent in December 2022, remains above the government target of 5 percent, mainly driven by supply-side constraints occasioned by external shocks and climate-related food and energy prices.
Treasury Cabinet Secretary Njuguna Ndung’u noted in the document that as part of the country’s economic turnaround plan, the government will scale up revenue collection to 3 trillion Kenyan shillings (about 24 billion U.S. dollars) in the 2023/2024 financial year and 32 billion U.S. dollars over the medium term.