Kenya's GDP growth may face challenges due to debt-financed development projects, according to a recent analysis.
"It should be noted that development projects, especially those funded through debt, must be carefully selected to ensure economic returns outweigh costs," the Budget Options for 2019/20 and the Medium Term report emphasized.
The Parliamentary Budget Office highlighted concerns over the slow implementation and quality of government investments. Many projects face delays, resulting in increased costs or abandonment, with some failing to drive economic expansion despite significant funding.
Over Sh350 billion in development projects have stalled due to legal disputes and mismanagement, including the Sh18.2 billion Olkaria-Lessos-Kisumu Transmission line, Sh62.854 billion Ethiopia-Kenya Transmission Line, and Sh9.4 billion Mwea Irrigation Project. County initiatives also face delays from delayed Treasury disbursements.
Despite a 5.1% reduction in the 2018/19 development budget to Sh677.2 billion, some projects will rely on loans, evidenced by recent infrastructure bonds like the Sh250 million M-Akiba issue. The Parliamentary Budget Office warned inadequate feasibility studies could worsen deficits and keep GDP growth at 5-6% annually.
"Unless there is significant change to scale up productive capacity, it will be difficult for the economy to grow higher than 6%," the report stated.
