In Summary
  • World Bank says cutting development spending at a time private sector is also struggling to access credit may leave the economy running at sub-optimal level.
  • According to the World Bank report, development expenditure contracted by 20.1 per cent in the 2017/2018 financial year.
  • Development spending is critical to building infrastructure like roads and sewerage and putting money in private hands through demand for raw materials, which ultimately creates new jobs.

The World Bank is cautioning that Kenya’s style of cutting development budget to reduce budget deficits and borrowing amid hitches in disbursements to counties may stifle growth in the near future.

The bank says cutting development spending at a time private sector is also struggling to access credit may leave the economy running at sub-optimal level.

World Bank senior country economist Peter Chacha said achieving fiscal consolidation may look good on the surface but doing so by contracting development spending will eventually slow the engines of growth.

“We have a concern with the quality of fiscal consolidation because when you cut more on development, you basically constrain potential for growth,” said Mr Chacha.

Development spending is critical to building infrastructure like roads and sewerage and putting money in private hands through demand for raw materials, which ultimately creates new jobs.

Cement makers, steel manufacturers, contractors and thousands of workers who are employed in infrastructure projects all benefit from public spending and are likely to feel the pinch of the slowdown.

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