Kenya's economy is expected to grow by 5.1 percent in 2012 representing a slight revision downwards from the 5.2 percent projected earlier in the year, a senior government official said on Monday.
Finance Minister Njeru Githae told journalists in Nairobi that there are strong prospects that economic growth will rebound in the medium term due to prudent government policies.
"Kenya's economic growth is expected to slow down to 5.1 percent which is below our projections, partly due to the fact that the global economy is showing poor signs of recovery," Githae said during the official launch of the 2013/14-2015/16 Medium Term Expenditure Framework (MTEF) public sector hearings.
The forum provides a platform for the country to build consensus on national development priorities for the second MTEF under the country's economic blue print Vision 2030.
Githae said the government has embarked on policies and strategies that seek to restore the economy back on growth trajectory and at the same time increase employment opportunities.
"This coupled with structural and legal reforms are expected to improve the competitiveness of the economy and promote overall productivity," he said.
The International Monetary Fund (IMF) has also projected the economy to grow at the similar rate and also approved 110.5 million U.S. dollars loan facility for Kenya as the East African nation moves to tighten its monetary policy to bring inflation further down.
The latest approval brings total disbursements under the arrangement to an amount equivalent to 529.6 million dollars since the first disbursement in January.
The economic activity in Kenya is rebounding after slowing down in 2011/12, helped by improved macroeconomic stability, foreign investment in oil and natural gas exploitation, and favorable weather conditions.
"Inflation has declined substantially, net international reserves have increased, public debt is low, and pressures on the exchange rate have dissipated," Shinohara said.
The East African nation's economy has undergone turbulent times in the recent past, but the recent IMF assessment said policies used by the government have so far prevented adverse effects and there are signs that even inflation that averaged 19 percent in November last year is coming down.
The economy has also experienced strain from drought that led to higher food prices and import of food as well as high oil price.
In addition, Githae said the government expenditure demands over the medium term must take into account the fact that resources are limited.
"Over the next five years, expenditure will basically remain at the level set out in the 2012 Budget Policy Statement and so there is need for prioritization of programs and adoption of a phased out approach on their implementation," he said.
Githae said that in line with the Financial Management Act, the Cabinet has approved the fiscal framework upon which the medium term budget will based.
He said the government is also prioritizing the enactment of bills related county revenue by the end of the year.
"As Treasury, we will be ready to provide finances to the devolved governments after the next general elections slated for March 2013," he said.
"When enacted, they will allow the county governments to access public funds," he said. It will create an internal county department in order to monitor transfer of funds to county governments.
"It will only deal with matters related to finances," he said. "The division will operate on a full time basis and will sound warnings to ministries that are not preparing to devolved resources to the counties," he said.
He added that the Treasury has already allocated 35 million U.S. dollars for the construction of country structures. According to finance minister, the county governments will be the drivers of the Kenya's economic growth in the future.
"We are banking on the counties to compete amongst themselves in order to lure investors while at the same time maintain a lean staff," he said.
according to him, under the current laws a minimum of 30 percent of county budgets will be reserved for development.
"We are also formulating rules in order to restrict personnel costs to not more than 25 percent of government expenditure, in order to encourage investments," he said.
Ministry of Finance Director of Economic Affairs Justus Nyamunga said the new constitution has resulted in a shift from a highly centralized system for budget preparation to a devolved system of execution.
Ministry of Finance Financial Secretary Mutua Kilaka said the treasury will ensure that public spending targets projects and programs identified and recognized by stakeholders as important.
"Expenditure will shift the composition of expenditure towards investment in infrastructure, education, health and security," he said.
Parliamentary Budget Committee Chair Elias Mbau said that legislators are putting in place measures that will ensure a smooth transition to the devolved system of government.
"We will ensure that the 2013 Budget Policy Statement is approved by parliament before body dissolves later this year, so that the next government has a draft budget for the 2013/2014 financial year," he said.