Fiscal strain, extreme weather threaten Kenya’s growth prospects » Capital News

NAIROBI, Kenya, Aug 25 – Mounting fiscal pressures and climate vulnerabilities could weigh down Kenya’s projected economic rebound, Treasury Cabinet Secretary John Mbadi has cautioned.

Speaking during the launch of the FY 2026/27 budget process, Mbadi said extreme weather shocks such as droughts and floods, which continue to threaten agriculture, infrastructure, and food security, could undermine the growth forecast of 5.3 per cent potentially destabilizing an otherwise promising recovery.

He further warned of broader risks, both domestic and external, including global trade disruptions and financial market volatility.

“Kenya’s economic outlook faces both external and domestic risks. Further, extreme weather may negatively impact agriculture, infrastructure, and food security,” Mbadi said.

While resilient performance in agriculture, manufacturing, and services has fueled optimism — with macroeconomic stability and strong business confidence boosting investor sentiment — Mbadi stressed that these external shocks could easily derail progress.

Kenya’s public debt currently stands at an estimated 65–68 percent of GDP, well above the sustainable threshold of about 55 percent, drawing scrutiny from international institutions.

Encumbered by heavy debt servicing obligations and slowing revenue growth, the government is weighing fiscal maneuvers such as bond buybacks and extending debt maturities to manage repayment pressures, which are projected to surge from Sh495 billion in 2025 to Sh822 billion in 2026.

Despite these constraints, the economy has shown resilience. In the first quarter of 2025, GDP expanded by 4.9 percent year-on-year, driven mainly by agriculture and manufacturing, even as hospitality and ICT sectors slowed.