Central Bank of Kenya Governor Dr. Kamau Thugge on Monday, January 29, shared his thoughts about the socio-economic stability of Kenya heading towards 2024.
In an article published in Foresight Africa and titled Forging ahead: Challenges, opportunities, and lessons from Kenya’s experience, Thugge noted that while the country was on a recovery path, there were still significant challenges to be braced.
According to the CBK governor, the challenges include tightening global conditions that will cascade to local levels and debt sustainability challenges.
Another challenge as outlined by Governor Thugge will be limited fiscal space that will prevent the government from optimal execution of socio-economic projects.
A photo of the Central Bank of Kenya
“The uncertainty within the global environment remains a risk factor for emerging market economies, including Kenya,” Thugge explained.
He noted that while global inflation had on average eased, the uncertainty in the global environment had resulted in rapid monetary policy tightening in Kenya and other economies which had subsequently led to tightening of global financial conditions.
On how the tightening of global financial conditions will affect Kenya, Governor Thugge explained it was resulting in high yields on bonds issued.
Additionally, the global financial conditions were leading to the depreciation of the Shilling against major world currencies including the United States dollar.
With high sovereign bond yields and a plummeting shilling, the CBK governor remarked that this had created a debt sustainability challenge.
Kenya and other middle economies are now trying to repay foreign and domestic debts amid tight budgetary constraints as outlined in the article.
Should this not be tamed, Thugge indicated that it poses a significant risk to inflation.
“Given the limited fiscal space, expenditures toward social sectors, public investment, and safety nets for poor and vulnerable groups have become highly constrained,” Governor Thugge spoke of the third challenge.
Governor Thugge stated that inclusive and sustainable growth was needed for the country to move into economic stability.
He remarked that this would address widespread unemployment which was majorly affecting the youth.
Kenyans queueing for jobs in Kenya.