Analysts say the east African nation has struggled to at tainits true growth potential of above 6 percent in recent years, due to a host of challenges including political uncertainties, periodic droughts and frequent attacks blamed on Islamists.

The Treasury said the economy likely expanded by 5.3 percent last year, but growth could be more robust this year, thanks to momentum picking up in a range of sectors like farming, real estate and financial services.

"The growth outlook is promising due to continued implementation of bold economic policies," the Treasury said in the document.

Inflation has been stable in recent months, staying inside the government's preferred band of 2.5-7.5 percent, while average commercial lending rates fell by a percentage point to16 percent last October.

The shilling has depreciated against the dollar in recent months but the drop has been gradual and the currency has been more stable than most of its frontier market peers like the Ugandan shilling.

The Treasury confirmed in the budget policy statement it had sought a precautionary loan from the International Monetary Fund to help it deal with any shocks to the economy in future.

--reuters--