The onset of the Covid-19 crisis adversely affected many sectors of the economy. The situation was exacerbated by significant drops in global demand, disruption of the supply chain and the overall deterioration of global financial conditions which has negatively affected tax revenue collection. Against this backdrop the economy contracted by more than 50 per cent in 2020. Meanwhile, public debt in relation to GDP increased while revenues dropped due to weaker economic activity leading to lowering of the sovereign credit rating. As a result there is a huge budgetary deficit, severely affecting Government spending.
Kenya fully acknowledges the disproportionate impact of COVID 19 Pandemic on global economies particularly in Low-Income Countries and therefore advocates for a robust collective and innovative action to (i). fight the Pandemic (ii) tackle debt vulnerabilities (ii). ensure economic recovery through sustainable Development Financing and (iii). address poverty and inequalities exacerbated by the Pandemic.
To this end, Kenya continues to respond with fiscal and monetary policy measures to safeguard livelihoods and stimulate economic recovery to directly address the impact of COVID-19. The measures include: rolling out of a country-wide vaccination programme; debt restructuring of both commercial and bilateral debt; accelerating access to alternative sources of financing such as the Green Climate Fund, enhanced engagement with traditional lenders such as the World Bank and the Africa Development Bank; and establishment of a Micro, Small and Medium Enterprises (MSMEs) Fund.
In the short and medium term, the Government of Kenya will continue high spending in health, water and sanitation, private sector stimulus, security and social protection sectors.