Kenya eyes inflation rate of 5 pct by 2014/15
17 January 2012, 16:52
Nairobi - Kenya plans to cut
inflation to five percent by 2014/15 (July-June) through
austerity measures to reduce its budget deficit, accompanied by
a tight monetary stance, Finance Minister Uhuru Kenyatta said on
Year-on-year inflation rose for 13 straight months to peak
at 19.72 percent last November, before easing to 18.93 percent
in December after the central bank raised rates aggressively and
good rainfall pointed to an improvement in harvests.
"The objective of the government is to stabilise the fiscal
and current account imbalances by tightening fiscal and monetary
policy to slow down inflationary pressures and exchange rate
depreciation," Kenyatta said.
The shilling fell against the dollar for most of last
year mainly due to a widening trade gap, amplified by global
increases in fuel prices and a drought that ravaged the Horn of
Africa, feeding through to higher inflation rates in the region.
Kenyatta said the government aimed to lower its budget
deficit to 5.1 percent by 2014/15 from this fiscal year's 6.1
Last month, the cabinet approved cuts in government
expenditure including official trips abroad, advertising,
hospitality and purchase of new vehicles.
"We want to cut as much as possible especially in
non-priority areas so that we can be able to release additional
funding to priority areas like the security situation," Kenyatta
The Treasury expects to seal a deal for a $600 million
short-term external loan this month to plug its budget deficit
in this fiscal year after it shelved plans to issue a Eurobond.
Kenyatta affirmed earlier projections by the planning
ministry expecting the country's gross domestic product to grow
by at least 5 percent this year on the back of growth in key
sectors of the economy.
"We are optimistic that the economy will continue to remain
resilient and the real GDP growth for 2012 will be above 5
percent with most of it coming from the expansion in
agriculture, tourism and exports tapping into the expanded
market in the region," Kenyatta said.