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Cabinet Secretary for National Treasury and Economic Planning John Mbadi has issued a notice addressed to the Central Bank of Kenya (CBK), providing guidelines for the economic policies that will steer the country towards achieving price stability and fostering economic growth in the upcoming fiscal year.
The government has set a target to stabilise inflation, boost economic performance, and ensure the sustainability of national fiscal policies.
Treasury Cabinet Secretary John Mbadi
Key Objectives for Price Stability
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The government’s primary objective, as outlined in the notice, is to ensure price stability, a cornerstone for macroeconomic stability.
The Central Bank of Kenya (CBK) is tasked with targeting a flexible inflation rate of 5%, with an allowable deviation of 2.5% on either side.
This target aims to cushion the economy against price shocks and volatility, offering a more stable environment for economic activities.
CBK will be held accountable for meeting this target, with regular monitoring and reporting to the government through the Treasury Cabinet Secretary.
This will be done by laying out fiscal policy measures that will promote sustainable economic growth while maintaining the general level of prices within the targeted range.
Treasury Cabinet Secretary John Mbadi
Measures to Achieve Price Stability
In the wake of fluctuating external factors and inflation risks, the Kenyan government has introduced several measures aimed at meeting the inflation target for FY 2025/26. According to the notice:
The CBK will monitor and address factors that deviate from the specified inflation range.
Specific actions will be taken by the CBK to manage inflation effectively and return it to the target range of 5%.
The government will allow flexibility in these measures to accommodate any unforeseen economic disturbances.
These proactive measures are crucial to ensuring that inflation does not disrupt the planned fiscal framework for the 2025/26 period.
Economic Growth Policy for 2025/26
Alongside inflation management, Kenya's economic policy for FY 2025/26 focuses on promoting economic growth across key sectors. This is vital for meeting the country’s growth objectives, which are outlined in the National Budget.
The government has committed to supporting the following priority sectors:
Agriculture Transformation: Efforts to modernize the sector to drive inclusive growth.
Micro, Small, and Medium Enterprises (MSMEs): Encouraging entrepreneurship and boosting job creation.
Healthcare: Expanding healthcare services and improving national wellbeing.
Digital Superhighway: Leveraging digital technologies for economic transformation.
The government will also continue to implement investments in education and human capital development, crucial to fostering long-term economic growth and stability.
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CBK Governor Kamau Thugge during a past media interview
Accountability and Reporting
CBK will continue to report regularly on its inflation targets and the implementation of these economic policies.
These reports will be sent to the National Assembly for review, ensuring full transparency and accountability in the process.
The government has emphasised that any changes to the fiscal approach, especially in the case of unexpected economic developments, will be clearly communicated to the public.
Looking Ahead
The letter stated that the country was on a path to enhancing its economic landscape, with a clear focus on fiscal discipline and growth.
It is expected that the measures outlined in the notice would build resilience against global economic challenges, while also addressing local economic needs.
The CS further indicated that, with continued monitoring and adjustment, it aimed to maintain economic stability and sustain development in the coming years.