Kenya Sees Growth Accelerating on Infrastructure Investments

Growth in Kenya, East Africa’s biggest economy, is expected to accelerate over the next three years as the government increases spending on roads, railways and power plants, the National Treasury said.

The economy may expand 6.1 percent in the fiscal year that ends on June 30, 2015, Geoffrey Mwau, economic affairs director at the Treasury, said today in a presentation in the capital, Nairobi. The rate is forecast to increase to 7 percent in 2015-16 and 7.3 percent the year after, he said.

“We expect strong growth mainly because of the investments we are making in infrastructure,” Mwau said. “The standard gauge railway alone will make a significant contribution to the economy.”

Kenya has sold $2.75 billion of Eurobonds this year to help fund spending on infrastructure. Kenya’s investment needs of $4 billion a year to deliver on its infrastructure pledges is one of the largest on the continent, according to the Abidjan-based African Development Bank.

The initial phase of the $3.8 billion standard gauge railway project, being 90 percent financed by the Export-Import Bank of China, will run from Kenya’s port of Mombasa to Nairobi. The link will be extended to bordering Uganda and the landlocked states of Rwanda, Burundi and South Sudan.

Kenyan President Uhuru Kenyatta’s government came to power after elections in March 2013 with a pledge to achieve annual economic growth of 10 percent by 2017. The Parliamentary Budget Office said in September that target is probably “unachievable” amid deteriorating security.

“Insecurity that has affected tourism is expected to continue being a risk in the medium term,” Mwau said.

The nation’s annual inflation rate is expected to “ease and stabilize” to the mid-point target through the end of the fiscal year in June, according to Mwau. The inflation rate slowed to 6.1 percent in November from 6.4 percent in October.

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