Economist urges government to invest in job creation
The government’s policy formulation should focus on creating private sector driven economic growth, Stanbic East Africa regional economist Jibran Qureishi has said.
Qureshi said despite a lot of focus to try and revive manufacturing which is noteworthy, authorities first need to intensely reform agriculture, the sector contributing the most to the economy.
“In order to achieve inclusive and sustainable economic growth, increasing agricultural productivity should be a key priority,” he said in a Nairobi hotel yesterday.
He suggested that the government should scale back on capital intensive projects like roads, in favour of job creating ones for instance agriculture, whose growth has remained poor.
Qureishi, who forecast the country’s gross domestic product (GDP) to grow by 5.9 per cent this year, said agriculture, transport and construction sectors were the hardest hit by interest rate capping
However, he said while growth has been robust in the services sector, the job creating sectors, especially agriculture, have remained poor.
“We are banking on the wrong sectors,” he said adding that 90 per cent of new jobs created are still in the informal sector, which was not enough to help the country achieve its middle class status.
Delayed payments
Qureishi noted that interest rate capping, delayed payments by the national and county governments to suppliers, as well as bureaucracy at the inland container depots (ICDs) and port of Mombasa, suffocated the private sector.
Last year, the country’s GDP growth stood at 5.6 per cent. Qureishi pegged the 0.3 per cent increment on increased production and export of tea, which he said is likely to pick up in 2020.
“The rains will boost production and demand from key source markets of Egypt and Pakistan will improve.
However, tea prices could remain subdued owing to increase in global production,” he said.
Qureishi said the tourism sector will also drive GDP growth but noted that the sector’s potential to contribute to the country’s wealth will depend on how much more private investment the sector can attract.
Money supply growth, Qureishi said, eased after the interest rate capping was repealed.
He projected that the Central Bank (CBK) monetary policy committee (MPC) will cut its lending rate by a further 50 to 100 basis points in the first half of 2020.
MPC last met in November and lowered its benchmark rate from nine per cent to 8.50 per cent. It is due to meet on January 27.
He said the government ought to ensure it remains committed to clearing private sector arrears to ensure that any stimulus being unleashed from the repeal of the interest rate capping law is not counterbalanced by cash flow constraints that have severely harmed the private sectors.
