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Economy

Treasury says locusts to dim economic growth

Locusts
Locusts fly over Kamburu Dam in Embu County on January 28, 2020. PHOTO | JOSEPH KANYI | NMG 

The Treasury has termed the invasion by desert locusts as a “systemic risk” that might prevent the economy from attaining its medium-term growth target of seven percent.

Systemic risk is the possibility that an event at an industry level could severely hurt the entire economy.

While estimates of the economic damage caused by the migratory pests on pasture and farmlands are yet to be quantified, the Treasury said potential disruption of agriculture poses systemic risks to Kenya’s economy.

“Locust invasion witnessed in the country in late 2019 and early 2020 poses a risk to agricultural production and food security,” says the Treasury in its recently released Budget Policy Statement.

“(The locust invasion) could have a negative impact on agricultural output, leading to higher inflation that could slow down economic growth.”

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Elevating the locusts invasion as a fiscal risk places the invading insects among other potential threats to the economy that are watched keenly by policy wonks.

Desert locusts are considered by scientists the most dangerous of all migratory pests because they can eventually develop wings and form a cohesive swarm, which can cross continents and seas.

They can devour crops from entire farm fields in a single morning.

On Monday, Agriculture Secretary Peter Munya said it would take up to six months to bring the locusts under control.

Other risks to the economy, the Treasury said, include public spending pressures, particularly related to wage-related recurrent expenditures as well as climate change and variability which it notes “has enhanced the frequency of disaster such as landslides, droughts and destruction of physical infrastructure”.

“The government continually monitors these risks to inform appropriate mitigating monetary and fiscal policy measures to preserve macroeconomic stability and strengthen resilience in the economy,” said the Treasury.

The Kenyan economy grew 5.1 percent year-on-year in the third quarter of 2019, compared with 6.4 percent in the same period in 2018, the Kenya National Bureau of Statistics said in December.

In the absence of these risks, the economy should be growing at a higher pace averaging seven percent annually within the next three years, “due to ongoing investments in strategic priority areas including the Big Four,” said Treasury Cabinet Secretary Ukur Yatani.

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